If you’re considering mortgage refinancing and are searching for the best mortgage lenders for your next home loan there are several things you’ll want to consider. Should you refinance with a nationwide giant like Amerisave or can a mortgage broker find you the best deal? Here are several tips to help you find the best mortgage lenders without overpaying on your next home loan.
Who Are Today’s Best Mortgage Lenders?
The number of choices you have when refinancing your home is often overwhelming. Credit unions, banks, and direct lenders all claim to have the best offers but how do you compare fees from different types of lenders? Unfortunately there’s no way to get an apples-to-apples comparison of the fees you’ll pay from different lenders using the Good Faith Estimate (GFE) lenders use to promote their offers.
Truth-in-Lending laws require lenders to give you a Good Faith Estimate of the fees you’ll pay when refinancing; however there are no standards for what fees need to be included or how much should be charged. The fees you find on the GFE are what lenders use for the Annual Percentage Rate (APR) you see advertised and have no basis in the reality of what you’ll actually pay when refinancing with even the best mortgage lenders.
Why Closing Costs Are So Important When Mortgage Refinancing
One of the most common mortgage mistakes is focusing only on getting the lowest refinance rates at the expense of fees. Some homeowners even shell out thousands of dollars in discount points to buy down their refinance mortgage rates when they have no hope of recouping their out-of-pocket expenses.
The average homeowner refinances once every four to five years; if you take out a new mortgage before breaking even on your closing costs you’re throwing your money away. How do you recoup closing cost like the loan origination fee? Here’s an example how breaking even works:
Suppose you’re refinancing your home for $250,000 at 5.0 percent. In this example your old mortgage rate was 6.5 percent and had a monthly payment of $1,498. Mortgage refinancing at 5.0 percent will lower your payment to $1,342 per month which represents a savings of $156 per month, or does it?
Before realizing that savings of $156 you’ll have to recoup your closing costs, including the loan origination fee paid to the broker. In this example we’ll say mortgage refinancing will cost you $5,000 at closing. Based on this figure it will take you 32 months to break even recouping your out-of-pocket expenses before you’ll see any savings from that $156 per month. If you’re okay with breaking even in two and a half years then mortgage refinancing probably makes sense to refinance in your situation.
You can learn more about getting today’s lowest refinance mortgage rates without paying unnecessary fees by checking out my free Underground Mortgage Videos.