Time to Refinance? 3 Secrets Lenders Don’t Want You to Know

If you’ve been waiting to catch a break on home loans, you’re in luck.

Mortgage rates on 30-year loans topped out this year at close to 8%, but have recently dropped by nearly a full percentage point. Which makes now an ideal time to explore financing, or refinancing, a home.

Cutting your rate by just 1% may not sound like much, but if you have an 8%, $400,000 mortgage, paying just 1% less could save you close to $300 monthly. That’s $3,600 every year, and nearly $100,000 over the life of the loan. That’s money you can harness to invest, pay off debts or use for anything from a vacation to home improvements.

Before you begin, step one is to do what lenders do: Check your credit score. If there are things you can do to improve your score, do them. The better your credit, the less interest you’ll pay. (See “5 Little-Known Tactics To Raise Your Credit Score.”)

Once you’ve done that, here are three more tips that will ensure you get the best rate and terms to minimize your costs and maximize your savings.

1. Shop around for the best overall deal

Take the time to shop and compare rates and closing expenses across multiple lenders. One firm could offer a 0.125% lower interest rate but charge 1% higher in fees at closing. Look for the total savings when weighing your options, not just the rate.

Where do you start your shopping? There are lots of places to compare mortgages online. Here's a good one.

2. Closing costs can be negotiated

When you refinance with Rocket Mortgage, lenders charge an origination fee to process the new loan. This fee is typically 1% to 5% of the mortgage amount. However, this amount is negotiable in most cases. Don’t be afraid to push back on the quoted costs and ask for reductions. If the lender won’t budge, let them know you will take your business elsewhere. A little persistence could save you thousands.

Remember: you’re doing that lender a favor by offering your business, not the other way around. Be the boss. Control the negotiation. Be nice, but be firm.

3. Timing matters more than you think

It’s best to close within 30 to 45 days from when you first apply and your credit is pulled. Mortgage rates and approval criteria can shift over time. Ideally, you want to secure terms based on your original financial snapshot. Don’t leave an application open too long or your deal could sour.

Whether it’s a new mortgage for a purchase or refinancing your existing home, use these tips to level the playing field with lenders. Get your paperwork together, don’t be afraid to negotiate, consider all the fees and pit lenders against each other. That’s the way to get the best possible deal.

Bonus: Explore alternatives like a reverse mortgage after 62

Once you turn 62, a reverse mortgage becomes an option for tapping home equity while letting you stay in your house. A reverse mortgage converts a portion of home equity into cash — often tax-free. Make sure to learn the risks and get quotes from multiple lenders.