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You probably realize the market is bound to fluctuate while your monthly mortgage payment will not, if you purchased your home with a fixed-rate mortgage. You’ve made a good deal if the market’s interest rate increases. You have some things to consider in terms of whether you should refinance in order to lock in the lower rate, however, if the market rate decreases.

The percentage point break is something you first need to keep in mind. How much are you paying on your current mortgage, as compared with the lower rate, and what’s the difference? The general rule is you should only consider refinancing when your mortgage rate is at least one full percentage point higher than whatever the current market rate is, despite what might otherwise seem like an attractive lower rate.

Next, take a look at what your lender would charge you in transactions fees. These are the fees you will be charged to actually go through with the refinance in the first place. If the fees are high enough, you may lose all or most of the benefit you would have gained in refinancing anyway. It is definitely something to take into consideration.

Keep in mind also that you may be rejected. In fact, it’s not uncommon when more than half of Americans are looking to refinance right now. In the first half of 2008, for example, a significant percentage above half of refinancing applications were not approved.

Another factor to consider logically follows. Certain criteria need to be met before you can refinance in the first place. In order to get the best refinance rates, you need to have a strong credit score. Even a strong score like 720 might not get you the rate you’re looking for in the refinancing process. You’ll probably need a 740 or higher if you want to maximize on a low rate.

You also need to shop around, as a final note. That rate may not be your best option. Visiting many lenders and doing your research is the only way to know. It is ultimately the best way to net yourself the lowest rate possible, even though it will take some time. It will undoubtedly be worth the effort, because this was what you were seeking in the first place.

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