What Factors Affect Your Mortgage Refinance Rate?

The mortgage refinance rate that you pay is affected by many different factors. When you are shopping around, you will find that rates vary and understanding why they vary can help you in your journey. Here are a few factors that cause your mortgage refinance rate to vary.

Credit Score

Your credit score is one of the biggest factors that affect your refinance rate. If you have a great credit score, you will be able to secure the lowest possible interest rate available. If your credit score is low, you will have to pay a higher interest rate. Your credit score allows lenders to see what type of borrower you are. If you have a good record with money, they will want to get your business. Therefore, they will offer you the lowest interest that they have. If you haven't been good with money, they will want to be rewarded for their added risk.

Federal Reserve

The Federal Reserve has a lot to do with the interest rate that you pay on mortgages. They set the rate that they lend money to banks at. Therefore, if they decide to lower the rate, you will be able to find generally lower rates in the marketplace. If they raise the rate, the rates you'll find from banks will be higher. They tend to lower the interest rate when the economy is slow and raise it when the economy is good.

Individual Banks

The interest rate that you pay will vary widely from lender to lender. Some banks have economies of scale and they can afford to charge less for their interest. They have to charge you enough to cover operating expenses and make a profit. Therefore, each company has different levels that they can afford to charge.

For example, a credit union is a non-profit organization. They do not pay taxes and therefore, they typically have a little bit lower rate than regular banks. They can pass the savings on to you in the form of lower interest rates. If you shop around and go from one broker to the next, you are likely to find out exactly who is the lowest around.


During certain times, mortgage lenders will run promotions on their mortgages. They are in business to make money and sometimes they like to sweeten the pot to get customers in the door. If you happen to be in the market for a refinance, you can take advantage of the promotion. Promotions will usually amount to a small discount, but even if it's half of a point it can help you in the long run.


The terms of the loan have an effect on the loan. If you get a 15 year mortgage, the interest rate will be different than if you got a 30 year mortgage. The longer the term, the more likely you are to pay a higher interest rate. 

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