If you want to refinance so that you can have a lower interest rate, there are a few ways you can do that, but you have to ask yourself what you are willing to do to have that lower interest rate. For example, if you shortened the term of your mortgage loan, you could reduce your interest rate without having to wait for the interest rate to drop, but your monthly payments would be higher since you would be paying more in principle, although less on interest. If the interest rate dropped, you could always try going for that interest rate.
You can also work hard to improve your credit in order to refinance for a lower interest rate. The best and most sure way to improve your credit (although it will take some time) is to use credit to pay for things, and then be really good about paying your required payments on time. Once you have a much higher credit score, you may be ready to refinance, but keep in mind that the higher the score, the lower the interest rate you will most likely get, unless your credit score is over 800 (you can’t really get much better than that).
There are certain credit scores, however, that would be too low to get a decent interest rate. So, what do lenders consider good? Generally, anywhere above 800 is considered excellent, 750-800 is very good, 700-750 is good, 650-700 is fair (average is around 678), 600-650 is bad, and anything below 600 is very bad. You can check your credit whenever you want on-line.
To get a lower interest rate, you can also merge two mortgages together if you already paid off a large chunk and your second mortgage has a much higher interest rate than your first. You can also do some research and if you find an ARM with better terms that will yield a lower interest rate, you can refinance, even if you are currently on an ARM (adjustable rate mortgage). You can also refinance from an adjustable interest rate mortgage to a fixed interest rate mortgage if that would lower your interest rate.
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