Finding the Best Refinancing Deal for You
If you decide that you are ready to refinance your
mortgage, you will want to contact several mortgage
lenders or brokers (including your current mortgage
lender) to discuss their loan products, rates, closing
costs, and fees.
Refinancing your mortgage will affect your financial
future, so it pays to invest some time and effort in
finding the best deal for you.
In trying to decide what refinancing option is the
best for you, here are some items to keep in mind:
Low- or No-Cost Refinancing
If you decide to refinance with your current lender,
you may be able to negotiate reduced points or having
the loan application fee, credit check, or title search
fees waived. A lender other than your current lender
may be willing to negotiate these fees as well.
Some lenders and brokers offer "no-cost"
refinancing, in which you do not have to pay most of
the required upfront processing costs and closing fees.
Instead, you may pay a higher interest rate or the costs
may be added to the amount you are borrowing.
Interest Rate Lock
An interest rate "lock" or "lock-in"
is an agreement by the lender to hold a quoted rate
on your loan for you for a specified period of time.
Interest rates change often, even hourly sometimes.
Ask if and when you can lock in the rate. This may be
at the time you apply for the loan or when the lender
approves the loan. You'll also want to ask if there
is a charge for locking in the rate, how long the lock-in
will remain in effect, and whether or not you can obtain
a lower rate if interest rates decline before your loan
closes.
Re-issue of Title Insurance Policy
A title insurance policy protects the lender (lender's
policy) or the homeowner (owner's policy) against loss
arising from disputes over ownership of or liens against
the property. You should ask your settlement or closing
agent to determine whether your title insurer can reissue
the policy, which may save you money.
Miscellaneous Fees
Ask about whether fees such as recordation, document
preparation, courier, notary, tax services, and other
fees can be waived. You may also have to pay fees depending
on the type of loan you have chosen or other factors:
for example, the funding fee for a Department of Veterans
Affairs (VA) loan guaranty, the mortgage insurance premium
for a loan insured by the Federal Housing Administration
(FHA), or private mortgage insurance premium. These
types of fees generally cannot be waived.
Prepayment Penalty
You should determine if your existing mortgage has
a prepayment penalty clause. If so, and you pay off
your existing mortgage earlier than the terms stated
in the loan documents, you may be required to pay a
penalty or fee. If your loan is subject to a prepayment
penalty, your loan documents should indicate the period
during which the penalty applies and explain how the
amount of the penalty is calculated, for example, sometimes
it is a percentage of the outstanding principal balance
of the loan.
In many states, mortgage prepayment penalties are prohibited
or limited by law, regardless of the provisions contained
in your loan documents. You may wish to contact the
appropriate state regulator for information about the
laws of your state and whether prepayment penalties
can be enforced in your state.
For information and educational purposes only.
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