4 must-dos when refinancing into an ultra-low mortgage rate

Mortgage rates remain at levels that might have seemed unthinkable just two years ago. Thirty-year home loans can still be found at rates far below 3%.

If you’re a homeowner with an existing mortgage, you might want to consider refinancing any loan you took out during the pre-pandemic era. Chances are you can get a much better deal now.

Refinancing at today’s historically low rates could save you a few thousand dollars a year in interest, and tens of thousands over the course of your loan.

If you think it might be time to replace your mortgage with a new one, here are four tips to make sure you get the most out of your refinance.

1. Be certain a refi is the right move

Before you commit to a refinance, there are a few important things you need to consider. Today’s basement-dwelling mortgage rates may look good on paper, but depending on the terms of your existing mortgage, you might be subject to loan conditions that could make refinancing a bad call.

Some mortgages carry a penalty for early repayment, especially during the first few years. You also could run into legal complications if you took advantage of a local government grant program, like one for first-time buyers.

Before you start looking at refinance loans, read your mortgage documents carefully to be certain you won’t get dinged with exorbitant fees. Then, make sure a refinance won’t end up costing you more in the long run.

If your current mortgage is for 30 years and you’ve already paid off half of it, refinancing into a new 30-year fixed-rate mortgage could cost you tens, or possibly hundreds of thousands of dollars in additional interest. It might be smart to go with a 15-year loan instead.

2. Talk with a pro

A good way to be sure refinancing is the right decision is by consulting with a professional. A certified financial planner could not only offer advice on your refi but also help create a retirement savings plan tailored to work with your mortgage.

That way, once your home loan is fully paid off you can rest easy knowing you’ve already got a chunk of change stashed away for your golden years.

Today, there are convenient online financial planning services that can give you top-of-the-line financial insights without high fees.

3. Compare rates to find the right loan

Thanks to rock-bottom mortgage rates, nearly half the homeowners who refinanced between April 2020 and April of this year are now saving $300 a month or more, a recent Zillow survey found.

With mortgage rates still low, you might be tempted to jump at the first refinance offer that comes along. But shopping around and comparing rates could wind up saving you even more on your new monthly payment.

You could do it the old-fashioned way, by researching local lenders and contacting them individually about their rates — but that could eat up a lot of time. A better option is to go online, review offers from at least five lenders, and compare them.

And note that checking mortgage rates will never impact your credit score.

4. Protect your investment — and your family

After you choose your new loan, take a fresh look at your homeowners insurance. Are you paying too much? Go online again, this time to get several home insurance quotes, and make sure you've got the right coverage at the right price.

And while it isn’t pleasant to think about, the possibility that something unexpected might happen to you — personally — is important to consider as a homeowner. You want to make sure your family won’t have to worry about how they’d make the mortgage payments in the unlikely event of your death.

The best way to make sure your family will be financially secure is by taking out a life insurance policy. The idea of shopping for life insurance might seem a bit uncomfortable, but a good online comparison site can make the process painless.

It never hurts to be prepared. Depending on how old you are and where you live, you could find a policy that offers your loved ones $1 million in financial protection for less than $7 a week.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.