About Refinance Mortgage Rates

Learn the make-up of mortgage rates and where to find great refinancing rates for excellent or bad credit scores

There is a common misperception among those shopping for a refinance, that mortgage rates come down when the FED (Federal Reserve Board) cuts interest rates. In fact, one (FED Cut) has little effect on the other (Mortgage Rates), at least in the short term.

For instance, the Federal Reserve cut interest rates by one-quarter of a percentage point on March 16, 2008 and quickly followed with a three-quarters of a percentage point cut on March 18, 2008. The 30 year Fixed Mortgage Rate responded by bouncing up from 5.65% to 6.37% while the key overnight lending rate to banks was reduced to 2.25%.

Why did Mortgage Rates go up while the
Fed is cutting?

Some might feel that banks are price gouging with the Fed's assistance, but that assumption would be incorrect. In reality, mortgage lenders have no control over the price of long-term loans. The main components that affect mortgage rates are inflation, treasury yields, and the "spread premium " between the 10 Year Treasury Yield (determined by bond traders worldwide) and the benchmark mortgage rate.

Fed Cuts affect the short-term rates for banks. The intent of these cuts is to lower borrowing costs for corporations so that they will invest and hire, but this projected growth can lead to inflation. This leads bond traders to demand a higher yield on their long-term bonds, which in turn, drives up mortgage rates. However, there can be a positive effect of Fed cuts on ARM (Variable Rate) borrowers. Adjustable mortgage rates are tied to many different indexes such as the One-Year Treasury Yield and the Libor (London Interbank Offered Rate), which tend to move with the Fed funds rate.

So, we know that mortgage rates are highly influenced by inflation and Treasury yields, but what is this thing they call the "spread premium "? The spread premium is the difference between the 10 Year Treasury yield and 30 Year fixed mortgage rates.

Historically, this spread has hovered in the 1.5% to 1.7% range, until the subprime meltdown and credit crisis reared it's ugly head. From the beginning of 2008 through much of 2009, the spread had held in the 2.6 to over 3.0 range!

Fortunately for refinancing homeowners of the time, the Treasury yields held at historic low levels, which kept mortgage rates at historical low levels.

The 2008-2009 high mortgage spread was caused by perceived investor risk. Investors were lined up to sell their mortgage-backed securities in favor of safer investments.

Later in 2009, we experienced a significant reduction in the mortgage spread due to the impact of the US government bailout effort which sunk hundreds of billions into buying-up these risky mortgage-backed securities, in effect altering lender balance sheets and significantly improving lender/investor liquidity. Downside home price volitility, although still a major risk factor, was reduced, and further helped to aid a reduction in the mortgage spread risk premium.

Refinancing homeowners remained in excellent "rate" shape with low mortgage rates available throughout 2008 and 2009.

News for Jumbo Mortgage
Refinancing Rate Shoppers

Many people purchased homes in "high cost" areas of the country during the great real estate boom of the mid 2000's. Many of these home mortgages were taken out as adjustable rate loans and/or high Loan-to-Value (LTV) loans of 90 percent or greater, which held a rather high rate of interest.

These homeowners may now be searching for a home mortgage refinance to either switch from a variable interest rate to a fixed rate, a lower fixed rate, or both.

A hurdle faced by many of these refinancing homeowners living in "high cost" areas is that the current balance of their home mortgages are greater than $417,000, which for the most part, are priced at the higher Jumbo Loan rate of interest for conventional home loans. The higher "Jumbo" pricing may negate or significantly decrease the benefit of a mortgage refinance for these homeowners.

One way to potentially jump the Jumbo Conventional refinance mortgage hurdle is to check out an FHA refinance loan. In many high-cost areas, FHA loan limits far exceed the $417,000 cap imposed on conventional loans, and still give you rock-bottom current market interest rates.

Click here to find the FHA Loan Limits for your county.

There is another FHA refinance benefit. With an FHA loan, you can refinance up to 97 percent of the appraised value of your home with little impact on your qualifying mortgage refinance rate. In a declining housing market, where LTV is often high, this can give you a little extra breathing room as compared to a conventional home loan option.

Please note the FHA refinance loan program will require a 1.75% upfront mortgage premium (UMP), added to the homeowner's total loan amount, but will not be included in the LTV calculation. Make sure to get your rate quote with the (UMP) added into the loan amount so that you have the "bottom-line" numbers for your home loan comparisons.

Where to find Current
Low Mortgage Rates

You now know what makes up the benchmark mortgage rates. So, where do you go to find great refinance options? Is there really a difference?

The following mortgage lender traits can translate to Lower Current Mortgage rates for You!

Investor and Bank
(Refinancing Lenders) Network

Mortgage lenders affiliated with a nation-wide network of major current banks and investors will translate to lower home loan mortgage rates. Keep in mind that qualified mortgage rates for refinance home loans change on a daily basis. The more options your lender has available, the better mortgage rates for you. The difference in rates can be quite substantial between a between a broker utilizing a relative small network and a lender that has built a large national network of investors and banks.

For example, on day number 1, Lender X offers a 6.0% rate for Refi Loan A and Lender Y offers a 6.25% rate for Refi Loan A. On day 2, Lender X offers a 6.125% for the same Refi Loan A and Lender Y offers a 6.0% for the same Refi Loan A.

Now, consider the lender having access to shop all major Investors and Banks (Lenders) in the nation!

Your odds of receiving great current mortgage rates for your home loan will be greatly enhanced.

Refinancing Lenders Rate Quote
Retrieval Software

Having access to multiple investors means little if your lender cannot retrieve the best competing mortgage rate offers for your refinance home loan. Competitve home loan refinance lenders update nation-wide mortgage rates constantly. Their rate quote retrieval software allows loan officers to access competing lender refinance rates accross the country for a borrower's exact qualified home loan scenario.... in less than 10 Seconds!

Mortgage brokers that still access quotes manually from investor rate sheets can cost their borrowers big time! Unfortunately, a large percentage of brokers still utilize this outdated and costly technique.

Direct Refinancing Lender Status =
More Borrower Benefits

A Direct Lender originates, processes, underwrites, issues loan commitments, closes, and funds their own loans with their own money . They do not deal with a middle-man, but have direct communication with the source of your loan. Home loan processing is expedited because the lender has great control and greater flexibility in underwriting your mortgage.

Direct Lenders will generally have a cap on the fees they charge and have Access to Special Programs or Rates only available through that lender.

Lower Refinancing Lender Overhead =
Lower Mortgage Rates

Home Loan Lenders that consolidate costs and reduce overhead, can pass the savings on to their customers. This really makes a difference, not only for lower mortgage rates, but for lower borrower fees. Lenders utilizing a streamlined loan process coupled with cutting edge technology can cut costs today more than ever!

High Home Loan Volume =
Lower Refinance Mortgage Rates

Lenders that do a high volume of home loans with investors and banks typically get better mortgage rates to pass along to their borrowers

Right Refinancing Lender Choice =
Current Low Mortgage Rates

As you can see , there is a difference, and choosing the right refinance lender can save you hundreds monthly and multiple thousands over the term of your new home loan!

Your Access to the Low Refinance
Mortgage Rates and Fees!

The Refinance Tool Box is here to help you gain access to current low mortgage refinance rates and fees, should you decide to get a Refinancing Rates Quote with us now for Free with No Hassle and No Obligation.

How to Spot a Fake Low Ball
Refinancing Rate Quote

Those shopping multiple sources for the lowest mortgage rates may receive great rate quotes. Unfortunately, many borrowers get hooked with Low Ball Rate Quotes and end up with a much higher mortgage rate by loan closing time.

Lender ABC sent me a Good Faith Estimate with my great rate quote, so I am protected...right? ..... Unfortunately, No!

A Good Faith Estimate is exactly what it states... an estimate only, and not a guarantee. The mortgage lender is not bound by the terms of the Good Faith Estimate and does not protect the borrower against Low Ball Rate Quotes.

Your Low Ball Refinancing Rate Quote Checklist

There are two major reasons for Low Ball Rate Quotes. 1) Outright Deception  2) Inexperienced loan officers who do not properly qualify your specific refinance loan scenario.

The following Refinancing Rate Quote Checklist should give you a leg-up in spotting Low Ball Mortgage Rate Quotes by deceptive refinancing lenders or inexperienced loan officers.

Loan Term: Is your quote is based on the same mortgage loan term requested? You asked for a 30 Year Mortgage Rate, make sure the quote for a 30 Year Mortgage Rate. A shorter term home loan will result in an inaccurate lower mortgage rate.

Adjustable or Fixed Rate: You asked for a 30 Year Fixed Rate? Make sure the quote is based on a 30 Year Fixed Rate. Adjustable rates are normally lower than a fixed rate. The difference in rate can be as much as 1% or more!

Pre-Payment Penalty: Ask if there is a pre-payment penalty associated with the mortgage program quoted. Pre-payment penalties bring mortgage rates down, but most borrowers do not want them.

Loan-to-Value (LTV): Ask lender what LTV the rate quote is based on. There is a major difference in mortgage rates for conventional home loans with Loan-to-Value ratios between 80%, up to 100%. If the lender uses an inflated value for your home, the qualifying LTV will decrease and result in a much lower and inaccurate rate quote.

Credit Score: Double check the credit score being used to qualify the rate. An inaccurate high credit score can result in an invalid lower rate quote.

Cash-Out or Rate-and-Term: Request a Cash-Out refinance rate quote? Make sure you are not quoted a rate based on a Rate-and-Term (only refinancing your current mortgage) refinance. The resulting mortgage rate quote will typically be 1/8% to 1/4% lower than the rate you are qualified for.

Escrow or No Escrow: Don't want an escrow account for property taxes and homeowners insurance? Make sure your quote is based on that fact. Rates quoted on home loans with escrow accounts set-up typically result in a lower mortgage rate of at least 1/8%.

The "BIG THREE" Refinance
Mortgage Rates Quote Process

The preceding checklist will weed-out many of the Low Ball Lender offers.

But if you want real assurance of Rate-and-Fee accuracy, you should work with a refinance home loan lender that follows the BIG THREE Refinance Mortgage Rates Quote Process.

1) Mortgage lender Qualifies Refinance Rate Quote, based      upon borrower's specific home loan scenario, verifying all      points on the Rate Quote Checklist mentioned above.
     Good Faith Estimate is immediately sent to borrower for      refinance program selected.

2) Borrower applies for that selected refinance home loan      program. Application detail is run through an automated      underwriting approval system using actual credit report      numbers for issuance of a lender preapproval for the exact      program and terms reflected on the Good Faith Estimate.

3) Rate and Fees are Locked at the exact terms as stated on      the borrower's Good Faith Estimate.

Borrowers and the BIG THREE
Process Advantage

Those refinancing receive THREE BIG BENEFITS when working with a home loan lender utilizing the BIG THREE refinance quote process.

1) Home loan lenders that use this process, typically have      low rates and fees to begin with... so less hassle for the      borrower having to shop multiple lenders.

2) Rates are Accurately Qualified BEFORE they are quoted.

3) Rates and Fees are Locked AFTER an underwriting pre-     approval is issued for the borrower's loan program,
    therefore Assured of Fair and Accurate Treatment.

Feel free to use the Refinance Tool Box today, for a current and Free Refinancing Rates Quote comparison.

You will never look at Refinancing the same!

Locking Your Mortgage Refinance Rate
and the Decision Making Process

My Credit is Good to Excellent.
What is my Best Refinance Option?

A good to excellent credit score will qualify you for the greatest number of refinance program options at low competitive refi mortgage rates.

Simply put, you should get low competitive refinance rates from a broker affiliated with current major nation-wide investors competing against one another for your business.

A company using the latest Lender Quote Retreival Software to pull current competing refinance lender programs offered for your qualifying loan scenario can give you a distinct refinancing advantage.

Lenders that utilize technology, streamlined processes, and a low overhead business model can create a winning combination for a low rate and fee refinance loan for you!

Request a Refinance Mortgage Rates Quote with us today!

My Credit is Not Perfect.
Can I Still Refinance?

The Refinance ToolBox can help those with poor credit scores, As Low as a 620 FICO Score.

We understand that everyone's credit is not perfect. In many cases, credit scores are affected by reasons beyond your control. Maybe you have had emergency expenses, sudden medical bills, increased tuition, and on and on. These unforeseen bills may be causing you to miss payments and make your credit score fall.

The Refinance Tool-Box would like to help those with falling credit scores to get a refinance loan that will help the situation immediately and also to make sense for the future. We can help with your refinance and qualify you for low competitive refinance mortgage rates.

Those with poor credit scores as low as a 620 mid fico can get low mortgage rates with a FHA refinance. In fact, those that qualify may receive lower mortgage rates than a comparable excellent credit qualified conventional refinance mortgage!

Check Out an FHA Refinance Mortgage Program

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