So, you’re considering mortgage refinancing. When the time comes to refinance in Massachusetts, there are five primary factors that will impact your Massachusetts refinance rates: your credit score, the length of the loan, the size of the loan, the loan-to-value ratio, and the state of the economy. With these five factors in mind, here are five things you can do to earn the best possible mortgage refinance rates in Massachusetts.
Improve Your Credit Score
Higher credit scores lead to better Massachusetts refinance rates. Lenders are more willing to offer low rates to customers who have the credit history to show they can be relied upon to make timely payments. If you want to upgrade your credit score before refinancing, here are a few things that will improve your score:
- Pay your debts in full and on time whenever possible.
- Limit the total personal credit you’re using (as with credit cards) to less than 30% of the total credit available to you. Your credit score rewards a low “credit utilization rate.”
- Keep old credit cards and accounts open, even if you don’t use them. This will show a longer total credit history.
- Don’t take on too many lines of credit; try to stick to a few cards and accounts.
Opt For a Shorter-Term or Adjustable Rate Loan
The type of Massachusetts mortgage program you choose will certainly impact the refinancing rate you are offered by the lender.
Longer loans come with higher interest rates and potentially other additional fees (called loan-level price adjustments), such as higher mortgage insurance premiums or fees for lower credit scores and/or smaller down payments. As one mortgage expert in Avon, Conn. explained to Investopedia, “Some of the loan level price adjustments that exist on a 30-year do not exist on a 15-year.” This means that refinancing from a 30-year to a 15-year mortgage can significantly shave down your interest rate.
Switching to an adjustable-rate mortgage (ARM) can also mean a lower interest rate up front, although it could fluctuate up or down in the future. With today’s Massachusetts refinance rates already at historic lows, it’s reasonable to assume that an ARM would end up costing more if or when rates rebound to pre-pandemic levels.
Keep Debt in the Loan During Refinancing
If you’re considering a mortgage refinance in Massachusetts, odds are you’ve already paid part of the original loan. This builds equity, which is good for your refinance rate because it improves your loan-to-value ratio. However, smaller loans tend to come with slightly higher interest rates in general, since the lender will need more interest to make their investment worth it. If you’re thinking about paying off a portion of the loan debt as a part of your refinancing plan, make sure you also consider how this will impact the interest rate of the loan.
Wait For Your Home’s Value to Rise
The value of real estate has always increased in the long run. This is one reason real estate is seen as a strong investment. Whether you wait to refinance until the housing market in Massachusetts is peaking (as it in 2021), or until your home has grown more valuable over the years, a better loan-to-value ratio always improves Massachusetts refinancing rates.
For example, if your original mortgage was for $150,000 on a house that’s now worth around $300,000, then your LTV would rise to 50% even if you hadn’t paid off any of the original mortgage. An LTV over 80% requires mortgage insurance in Massachusetts, which would negatively impact your refinance rate.
Refinance When Interest Rates Have Dropped
As we mentioned earlier, the Massachusetts refinance rates have plunged to a shocking low as of February 2021, and will likely remain around 3%, give or take a few tenths of a percentage point, for most MA homeowners over the coming months. But these low rates won’t last forever. Take advantage of this historic drop in mortgage interest rates by locking them in with a Massachusetts mortgage refinance while you still can.
If you have any questions about mortgage refinancing rates or want to discuss the refinancing program options available to you, then reach out to Poli Mortgage at 781-232-8000 or by visiting us online!