There’s a lot of talk in the news that rising refinance rates might derail our economy’s recovery. Those working in the mortgage business point to uber-low refinance rates as the reason things were improving for most Americans. Have you been on the fence about refinancing only to watch refinance rates skyrocket towards five percent? Here’s 5 easy tricks you need to know to save money locking in your lowest payment before the opportunity slips away.
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Rising Refinance Rates Are Good Motivation
You might think rising refinance rates would put the brakes on demand for refinancing. I’m noticing a different reaction, people I know that haven’t already done so are clamoring to refinance before the opportunity is gone.
No one figured refinance rates would take off, people counted on interest rates falling or staying where they are. Now, seemingly overnight, mortgage rates have shot up and given many homeowners the necessary kick in the pants to do something about refinancing their home loans.
If you’re in the market to refinance you might wonder how the lender fees you pay affect the deal you’re getting. In fact, your mortgage settlement fees make or break your mortgage, especially now that refinance rates are above four percent. Here are 5 smart moves to make now and get a better deal than your neighbors, despite rising refinance rates.
5 Ways to Pay Less Mortgage Lender Fees
The test of how good of a deal you’re getting with current refinance rates is how much you have to pay at closing. Loan origination, processing and rate lock fees all come out of your pocket and you’ll need to recoup paying before you’ll benefit from lowering your refinance rates. You can minimize the amount of time it takes to break even using these 5 refinance rate shopping tricks.
- Start By Checking Your Credit Reports
- A Smarter Way to Shop for Refinance Rates
- Run The Numbers With a Simple Mortgage Calculator
- Shop For The Lowest Loan Origination Fee
- Make Sure You’re Locking Refinance Rates In Writing
With refinance rates hovering at 4.5% if you’re finding that the quotes lenders are giving you are higher than what you’re seeing advertised the likely culprit is your credit score. When’s the last time you visited AnnualCreditReport.com? The law requires the three credit bureaus (Equifax, Experian, and Trans Union) to provide you a free copy of your credit report once per year.
You won’t get a free credit score but have the option of paying. You can get free access to your Trans Union credit score with no strings attached by visiting CreditKarma.com.
If you find mistakes in your credit file there is an online process for disputing the error with each credit union.
The Good Faith Estimate is an excellent tool for comparing mortgage refinance rates and fees, if you go about it correctly. First, make sure all of the quotes you’re getting are for identical mortgage programs. If you need 30-year fixed refinance rates don’t let a fast-talking loan officer quote you a 15-year ARM.
Next, make sure the quotes you’re getting do not include discount points. If you’re curious how this fee might lower your payment there is a table on page three of your Good Faith Estimate, however; for comparison sake it’s best to start with zero discount point quotes.
You can approximate your break-even point using a simple mortgage calculator like this one. Enter the refinance rates you’re being quoted along with your desired term-length.
Simple Mortgage Calculator
The difference between your old payment and the new one is your monthly savings. Divide the total closing costs on your Good Faith Estimate by your monthly savings and you’ve got the number of months it’s going to take you to break even. If you’re ok with the timeframe for recovery then taking current refinance rates probably make sense.
The fees that you want to pay attention to are found on page two of the Good Faith Estimate. The loan origination fee gives you the most bang for your shopping efforts. Many loan officers will tell you that paying one percent for mortgage origination fees is standard; however, I’ve reviewed community based credit unions on this website that charge as little as $400 for the lender origination fee.
Your origination fee is found on page two of the Good Faith Estimate, section A, item one. Don’t be afraid to haggle over this one, you’ll find it varies from one bank, lender or credit union to the next.
If your loan officer is telling you that you’ve locked refinance rates but you don’t have anything in writing, you haven’t locked. Some lenders charge a rate lock fee even though it doesn’t cost anything to lock refinance rates. If you’re being required to pay a fee to lock your refinance rates ask to have that fee credited towards your settlement costs at closing.
Remember the less you pay for current refinance rates the more you’ll benefit from lowering your payment. You get a better deal and more cash at the end of the month, which is what everyone wants right?
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You can learn more about paying less to lock in current refinance rates from today’s best mortgage lenders by checking out my free Underground Mortgage Videos.
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