How can you get the best online refinance without paying unnecessary discount points or lender junk fees? Online mortgage refinancing has become the most popular way of getting a new home loan; however, most of your neighbors overpaid thousands of dollars one way or another. Here’s what to expect from online refinance rates and several tips to avoid overpaying for your next home loan.
How to Get the Best Online Refinance
With the exception of a few community based credit unions, most lenders allow you to fill out applications online. This allows you to compare refinance rates and fees like the loan origination fee for a variety of banks and lenders.
The main advantage of an online refinance is the convenience of shopping from your home or work computer. You can quickly compare rates and fees without visiting an office or speaking to a pushy loan officer on the phone. One of the problems with online refinance rates is that it can be difficult to get an apples-to-apples comparison of mortgage rates and fees across different lenders.
Types of Online Mortgage Lenders
The most common type of mortgage lenders includes banks and community based credit unions like Wells Fargo and Navy Federal Credit Union. Large nationwide banks like Wells Fargo and Bank of America don’t always offer the most competitive fees for loan origination and may quote unnecessary discount points.
Mortgage Brokers arrange home loans for wholesale lenders and a good broker can quickly place you with a lender offering the lowest fees for a commission. The problem with using a broker for your online refinance is overpaying the broker’s commission will make it more difficult to break even recouping your out-of-pocket expenses. That being said, finding an honest mortgage broker can save you thousands of dollars from unnecessary lender fees at closing.
Unnecessary Mortgage Fees
There are a number of fees you’ll want to keep an out for on any mortgage. Refinance rates are at historically low levels yet many lenders quote interest rates that include discount points. Paying unnecessary points at closing raises your out-of-pocket expenses reducing the benefit you’re getting from that low interest rate.
Should you trust a lender’s Annual Percentage Rate? Lenders like to tote their low APR home loans which might not give you an accurate portrayal of their fees. It is possible to find online refinance loans with the lowest APR but the highest closing costs if the lender is quoting discount points. Additionally, because there is no standard for the way lenders treat fees getting apples-to-apples comparisons of different lenders can be next to impossible.
How to Shop for Your Next Home Loan
The best way to shop for an online refinance rate is to compare both refinance rates and fees without discount points. Community based credit unions are an excellent starting point as I’ve reviewed credit unions with origination fees as low as $700. Paying one percent for loan origination is a common unless you’re trading higher refinance rates for the lender paying your closing costs, meaning you’ll have higher monthly payments.
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You can learn more about getting the best deal on your next home loan without paying unnecessary fees by checking out my free Underground Mortgage Videos.
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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.
