If you’re thinking about mortgage refinancing to take advantage of today’s historically low rates you might consider shortening the term length of your new home loan. Term-length is the amount of time that determines your home loan’s repayment schedule or loan amortization. The shorter your term length the faster you’ll build equity in your home and the lower your interest rate will be. According to this article in the Washington Post more homeowners are shunning debt by choosing mortgage refinancing with shorter term lengths.
Could I refinance you into a seven-year fixed-rate mortgage at 2.99 percent? Or how about 10 or 15 years fixed in the mid-3s? These might sound suspiciously like teaser quotes with tricks in the fine print, but they are in fact signs of an important shift underway among American homeowners: Not only have they been refinancing at a robust pace in recent weeks, but they’re also ratcheting down on the remaining number of years they plan to pay on their mortgages.
Despite historically low-interest rates, most homeowners overlook fees when it comes to their mortgage refi. The fees and closing costs you pay determine how good of a deal you’re getting when refinancing your home because you’ll have to recoup these expenses before realizing any savings from your new home loan.
One of the most common mortgage mistakes is overpaying the origination fee or allowing the lender to pay it for you. If you let the lender pay the broker for you, you’ll be accepting a higher interest rate which will drive your monthly payment up by as much as $100 a month. If you want the best refinance rates for your next home loan, it’s important to pay the origination fee yourself.
There are several junk fees you’ll want to avoid paying to reduce the amount of time it takes to recoup your closing costs. Broker courier fees, application fees, rate lock fees, and processing fees all drive up your closing costs unnecessarily. You can learn more about avoiding unnecessary fees and markup on your next mortgage refi by checking out my free Underground Mortgage Refinancing Videos.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
