If you’re still paying on a six percent home loan, refinancing with one of today’s best mortgage companies could literally save you thousands of dollars. The trick when it comes to mortgage refinancing is to avoid souring the deal with unnecessary fees and markup. Before benefiting from low refinance mortgage rates you’ll need to break even recouping your out-of-pocket fees from the lower payment amount. Here are my top 5 mortgage refinancing tips to make sure you’re not overpaying one red cent for your next home loan.
1. Comparison Shop The Best Mortgage Lenders
Refinancing with your existing lender might be convenient; however, your current lender won’t always offer you the lowest refinance rates available. Comparison shopping mortgage rates and fees can help you avoid lender junk fees and unnecessary markup.
2. Beware No Cost Refinance Offers
Lenders frequently offer no closing costs refinance offers. These offers always have markup of the refinance rates built into the fine print. Also, beware prepayment penalties as these are attractive offers for homeowners planning on selling or refinancing again in a few years.
3. Avoid Lowering Your Payment at All Costs
Lowering your monthly payment amount is important when mortgage refinancing and allows you to recoup your closings costs; however, you need to consider more than just lowering the payment amount. When shopping for the lowest mortgage refinance rates, pay attention to fees including the loan origination fee and any discount points. Make sure you’re able to break even recouping these fees in a reasonable amount of time.
4. Remember Your Rescission Rights
The law provides 3 day rescission rights, meaning you have 3 business days to change your mind and back out of the deal. Many lenders don’t talk about rescission rights; however, if you elect to bail on the loan offer send your lender a letter via overnight registered mail stating you’re a canceling the refinance.
5. Choose a Shorter Mortgage Loan Term Length
Most people choose mortgage refinancing to lower their payment amount. In some instances it’s smart to choose a shorter term-length because you’ll not only get lower interest rates but you’ll build equity in your home at a much faster pace. With today’s low refinance rates it’s still possible to break even recouping you closing costs with a 15 year mortgage. There are also incentive is government programs like HARP and the FHA to encourage mortgage refinancing with a 15-year home loan.
You can learn more about refinancing your home without paying lender junk fees or unnecessary markup by checking out my free Underground Mortgage 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.
