Homeowners who are seriously considering refinancing their mortgage in order to obtain a lower interest rate may increase their chances of success by taking the right steps. Homeowners must understand that they can achieve the best results in their refinancing endeavors by comparing the interest rate along with closing costs that the lender charges in order to extend a mortgage. While the absolute lowest interest rate sounds good to talk about at the country club, an interest rate that is slightly higher may be the be a better deal if the closing costs are significantly lower and other important factors.

One such factor is the anticipated time that the homeowner plans to keep the property. In interest rate difference of as small of an amount as one quarter of a percent can make a difference of nearly $8,000 over a 30-year period. However, if a homeowner does not intend to own the property for more than a few years, then they will probably benefit with an adjustable rate mortgage, referred to as an ARM that offers an even lower interest rate that can remain unchanged for five to seven years.

Before homeowners consider refinancing their homes, they should know their credit score and find ways to improve that score before applying for a loan. Besides knowing their credit score, homeowners need to look at their credit report. A credit report may contain errors and there are ways to correct errors that will improve one"s credit score. By knowing their credit score, homeowners may be able to improve their credit score by paying down some of their debt. In addition, they can close credit card accounts that do not have a balance and request each credit card company that issued their credit card to lower their credit ceiling. People with higher credit scores are eligible for mortgages with lower interest rates.

Homeowners who wish to refinance their mortgage with the lowest possible interest rate should retain the services of a professional mortgage broker. Mortgage brokers work with lenders at local, regional and national levels. Many lenders who offer the best interest rates and most favorable loan terms do not advertise. They obtain their business only through mortgage brokers. This eliminates the need for them to use their resources in money for advertising and time in screening loan applicants.

People who use mortgage brokers pay for their services, whether directly as an upfront fee or indirectly through kickbacks from lenders. If the mortgage broker charges an applicant a fee, the applicant has a right to full disclosure of any costs associated with the mortgage before committing to a contract. In this type of situation, it is easy to calculate the cost of the mortgage in order to compare it with the savings realized from the refinancing transaction. The amount that the homeowner is able to save when they do not pay the mortgage broker a fee for their services is even simpler to figure out.

In conclusion, homeowners who are trying to obtain the lowest possible interest rate when refinancing their mortgage can make a significant difference on the outcome of their efforts by approaching the task fully prepared. They prepare themselves by selecting the proper loan for their needs. Then they learn what their credit score is and take the necessary actions to improve their credit score. Finally, by hiring a mortgage broker, homeowners can save themselves a significant amount of effort by only working with lenders that specialize in offering loans to people that have a similar financial profile as theirs.