The good news about re-financing your mortgage…there’s still time to do it before anticipated interest rates hike up over the course of this year. The bad news…not all re-financing deals are good ones.
Take a look at these re-financing tips before committing yourself to a long term contract.
- Be cautious about advertised rates you may see/hear/read on various media platforms. Usually those advertised rates are based upon best case scenarios for people who are in great financial shape with top credit scores. Know that “…you need to (fully) apply to each lender…” in order to get a likely rate from a potential lender, according to Tania Guzman, branch manager at New American Funding in El Paseo, TX. Also, because rates fluctuate and change quickly, gather all quotes from all lenders to whom you apply on the same day. The smallest differential will have big financial consequences over the life of any refinancing contract.
- Just as you do with doctors, get a second (or third) opinion/quote from multiple brokers. Just because “your” broker gave you a “good deal” on one loan doesn’t mean you’ll be satisfied a second time with the same broker. J.D. Power’s Annual Mortgage (and Refinancing) Origination Satisfaction Study indicates that clients who initiated two or more quotes had a higher satisfaction rating with the loan rate they received than those who initiated only one quote.
- Look for “junk fees.” Account commissions and transaction fees are also known as non-recurring closing costs for processing or underwriting credit reports, title fees, origination fees. Look also for the “closing time” or the period that your application is locked into the time of the closing, usually 45 days. Be aware that the annual percentage rate or APR of the loan combines the interest rate of the loan with the closing costs such as originator fees, mortgage insurance, appraisal and inspection fees, credit report fees and title insurance fees. Ask what happens if the lender sells your loan to another lender, i.e., how are you certain you will be responsible for the loan contract you signed with the original lender. Always ask if any and/or all of these fees are negotiable. And, make sure you compare all the fees on each lender’s loan estimate…these fees can make a huge difference in determining whether or not refinancing makes true financial sense.
- Make sure you’re really saving. Calculate your break even point by calculating the total sum of all closing costs and dividing that number by the estimated monthly savings to see how long it will take for any mortgage refinance package to pay for itself.
- Think twice about “no cost” refinancing packages. “No cost” may mean a higher interest rate to cover those “no costs.” Nothing is free. Again, do the math for each and every loan package you initiate to determine how much a refinancing package may cost you every month over the life of the loan.
- Explore different loan options. Not every loan ought to be a 30 year loan. Maybe a 15 year fixed rate or an adjustable rate package might work better if you’re not planning on staying in your current home over the long haul.
- Remember the customer service relationship. Are your questions being answered fully and courteously? Are all options being presented to you? Is the broker responsive to your calls and emails?