Who Will Refinance My Mortgage?

Now that home refinance rates are going up you might be wondering if you missed the boat on lowering your mortgage payment. While it’s true that rates have gone up over the last two weeks it’s not too late to get a great deal on your next home loan. Here are several tips before you refi to help find a lender who will “refinance my mortgage” without paying unnecessary fees or markup.

Who Are The Best Lenders to Refinance My Mortgage?

Everyone wants low home refinance rates. Some people focus only on getting the lowest mortgage rates at the expense of fees. If you do this when trying to find the best company to refinance my mortgage it could be difficult, even impossible to break even recouping closing costs.

If you never break even because you paid unnecessary discount points or overpaid the loan origination fee, you’re going to be losing money no matter how low your interest rate.

How to Calculate Your Break Even Point

Knowing how long it’s going to take you to break even is the first step in answering the question “Should I Refinance my mortgage?” You can approximate your break-even point using a simple mortgage calculator like this one.

Simple Mortgage Calculator

Loan Amount: Years: Interest Rate:

Annual Taxes: Annual Insurance:

Monthly Payment =

Plug in the loan details from your Good Faith Estimate and click “Calculate Now.” The difference between your old payment and the new one is your monthly savings. Dividing the total amount of your closing costs found at the bottom of page 2 of your Good Faith Estimate will tell you the number of months it’s going to take to break even.

This calculation is only an approximation because it doesn’t factor in taxes or changes in your home loan’s term length. As long as you’re keeping the same term length or going shorter the approximation is good enough to answer the question “Should I refinance my mortgage.”

Who Will Refinance My Mortgage Loan?

Before you start shopping for today’s best mortgage lenders you should invest some time checking your credit reports for mistakes. If you’re already shopping for the best mortgage lenders and find the home refinance quotes you’re getting are coming in higher than what lenders are advertising the likely culprit is your credit score.

If you haven’t done so already head over to the website AnnualCreditReport.com. The government requires the three credit bureaus (Trans Union, Equifax, & Experian) to give you free access to your credit reports once per year and AnnualCreditReport.com is how they comply with the law. Credit reports are free but you’ll pay a fee if you want to see your credit scores.

If you don’t want to pay for a credit score CreditKarma.com will give you free access to your Trans Union credit score with no strings attached. Keep in mind that you have three credit scores, one for each credit bureau. Mortgage lenders look at your middle credit score so if your scores are 680, 710 and 720 your middle score is 710.

Bonus Tip: The fastest way to boost your credit score is to pay down the balances on your credit cards below 30% of your credit limit.

How to Shop for the Best Mortgage Lenders

Remember that focusing only on home refinance rates gets you in trouble. Page two of the new Good Faith Estimate is the best mortgage fee comparison shopping tool available. Start with the loan origination fee which is item one in section A.

Do you know how much is reasonable for the mortgage loan origination fee? Many loan officers will tell you that one percent is standard; however, I’ve found community credit unions who will refinance my mortgage for as little as $400 for mortgage origination.

The less you pay closing on your home refinance the faster you’ll break even and the more you’ll benefit from low mortgage rates.

What About No Fee Refinance Loans?

You’ll see lenders like Wells Fargo advertising “No Fee” home refinance loans. Your lender might even offer this as an option at closing. No fee mortgage loans don’t really exist; every home loan has fees that have to be paid at closing. What’s different about no fee home refinance loans is that your lender is paying the settlement fees in exchange for you taking higher mortgage rates.

Is this a good idea? Taking a higher mortgage rate by a quarter or half a point means that your monthly payments are going to be higher for the entire time you’re paying the loan. (The average homeowner refinances every 4-5 years) You’ll reach a point when you break even on the fees your lender paid and after that you’re losing money.

If you don’t have the cash to pay your closing costs consider rolling the fees into your loan balance instead of taking higher mortgage rates.

You’ll find the credit for accepting higher home refinance rates on page two, item two of section A of your Good Faith Estimate. (This credit is known as mortgage Yield Spread Premium)

Other Mortgage Lender Fees to Consider

Section B of page two lists lender specific fees and other closing costs you can shop around for. Comparing page two from a variety of credit unions, banks and direct mortgage lenders will give you an idea of what’s reasonable.

Some of the best deals I’ve found when shopping for a lender who will refinance my mortgage have come from small community credit unions. Don’t let the credit union membership requirement discourage you from shopping credit unions, most will let you join when you’re doing a home refinance.

Protect Your Credit Score When Comparing Home Refinance Rates

Some homeowners refuse to give their Social Security number when shopping home refinance rates because they think they’re protecting their credit score. If you do this you’re relying on a loan officer’s best guess of what interest rates and fees you’ll qualify. This is almost always a waste of your time.

While it’s true that having a mortgage lender run your credit lowers your credit score there’s no way around getting dinged for a hard inquiry. The trick is to limit all of your home refinance rate quotes to a two week (14 day) period. When you do this you’ll only get dinged for one mortgage lender’s hard inquiry on your credit report.

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The “Should I Refinance” Rule of Thumb

If you’re considering mortgage refinancing you may have heard of the two percent rule of thumb. This mortgage refinance rule states you should only take out a new home loan if the interest rate is two percent lower than your existing rate. Is this the best approach for answering the question should I refinance my mortgage or are you leaving cash on the table? Here’s a better way to base your mortgage refinancing decision and help you avoid paying too much in the process.

The Should I Refinance Rule of Thumb

Refinance rates are hovering near four percent, the lowest levels in sixty years. If you’re currently paying six percent or more on your home loan then the two percent rule applies to you but what about everyone else? If you’re paying 5%, even 4.5% you can still benefit from mortgage refinancing. Answering the question “Should I Refinance” based on a two percent drop in your interest rate is walking away from a lot of money.

Here’s how to make an informed decision if mortgage refinancing is right for you without leaving cash on the table.

This example illustrates the problem with the “two percent rule.”

  • Mortgage Loan Amount: $400.000
  • Term Length & Rate: 30-year fixed-rate @ 5%
  • Refinance Mortgage Rate: 4.25%
  • Refinance Closing Costs: $4,000

In this example the monthly payment at 5% is $2,147. Refinancing with today’s best mortgage lenders could get you an interest rate as low as 4.25% which lowers your payment to $1,967. This is a savings of $180 per month BUT mortgage refinancing will cost you four grand. Is it worthwhile?

Debunking The Two Percent Rule

In this example it’s going to take about 23 months to break-even recouping your out-of-pocket expenses. (divide $4,000 by the $180 you’re saving each month)

This is a reasonable amount of time to recoup your closing costs so if you’re answering the question should I refinance in this way it makes sense. In this example we were refinancing a large home loan, $4,000. If you’re refinancing a lesser amount you’ll still want to run the numbers before answering the question should I refinance because the amount you’ll be saving each month will be less and it will take longer to break even.

If you decide to sell your home or refinance again before recouping your closing costs you’re going to lose money no matter how low interest rates fall.

How to Avoid Unnecessary Points & Junk Fees

As you can see your closing costs decide how long it’s going to take to break even recouping closing costs and therefore how good of a deal you’re getting. One strategy for getting the most benefit from mortgage refinancing is to pay as little as possible at closing. Sure there are no free refinance options; however, you’re giving up low refinance rates in exchange for having your closing costs paid.

The best way to maximize your benefit from low refinance mortgage rates is to avoid paying discount points and lender junk fees. Discount points serve to lower your interest rate. Why pay a fee when rates are at the lowest levels in sixty years and discount points only push your break-even point further away?

Lender junk fees like application and processing fees or overpaying the origination fee do the same thing. You shouldn’t be paying more than one percent for the loan origination fee and I’ve even seen some small credit unions charge as little as .28 percent. Shopping for both refinance rates and fees will make sure you’re breaking even in the least amount of time and maximizing your benefit from the new home loan.

Shorten Your Term Length Whenever Possible

Once you’ve answered the question Should I Refinance, another strategy for saving money is to lower your term-length. The term of your home loan is the amount of time you have to repay the mortgage and along with your refinance rates determines your payment amount.

One common mistake is going from a 15-year to a 30 or even 40-year mortgage. If you do this the calculation we’ve been using to find your break-even point is no longer valid. In these cases you’ll never break even and will be losing a boatload of cash because on the interest you’re paying for those extra years.

Shortening your term-length allows you to build equity in your home at an accelerated rate and saves you thousands of dollars per year in finance charges. Government programs like HARP 2.0 encourage shorter term-lengths for this very reason. This is why you should consider a 15-year or even 10-year mortgage if you can afford the higher payments.

If you need help with the math when answering the question should I refinance, leave a comment below and I’ll be more than happy to lend a hand.

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You can learn more about saving thousands of dollars on your next home loan by avoiding junk fees and markup by checking out my free Underground Mortgage Videos.

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How do I Refinance My Mortgage?

If you’ve been contemplating the question should I refinance my mortgage there are several things you should know before jumping in. The refinance mortgage rates you get and the fees you pay all boil down to the answers you get for the question How Do I Refinance My Mortgage. Here are several tips before you refi with sound answers to the question How do I Refinance My Mortgage loan.

Should I Refinance My Mortgage?

Most people’s goal for mortgage refinancing is to lower their monthly payment. You can do this by taking advantage of today’s low refinance mortgage rates. Keep in mind that mortgage refinancing is going to cost you out-of-pocket at closing so the answer to the question Should I Refinance My Mortgage comes down to how long it’s going to take you to break even recouping your closing costs.

You can quickly figure this out once you know what your new payment will be by dividing your total expenses including the loan origination fee by the amount your mortgage payment is going down each month. This tells you the number of months it’s going to take to break even recouping your fees. The average homeowner refinances every four to five years; if you refinance before breaking even you’re losing money no matter how low your interest rate.

How do I Refinance My Mortgage Without Overpaying?

There are two important steps to getting the best deal when refinancing your mortgage. First, make sure your credit score isn’t preventing you from getting today’s lowest refinance mortgage rates. The interest rates you see advertised by lenders like Amerisave are based on having a lofty credit score of 820 or better. If your credit isn’t up to snuff your refinance rates could be much higher depending on the state of your credit reports. Invest a little time spring cleaning your credit and make sure the information is accurate. Also, try and pay down the balances on your credit cards as much as possible before applying for your mortgage refi.

Second, to get the best deal when mortgage refinancing make sure you’re not overpaying the loan origination fee or paying unnecessary discount points. The mortgage origination fee is paid to the company or broker arranging your refi and should not be more than one percent of your home loan amount. As for discount points, this is a sneaky tick used by even the best mortgage lenders to make their offers seem more attractive.

Refinance mortgage rates for a 30-year, fixed-rate home loan have been hovering just over four percent for almost seven weeks now; however, several lenders like Wells Fargo Refinance are advertising in the 3 percent range. How are they doing this? The fine print reveals the fees required to get their advertised rates. Assuming you have the necessary credit score to qualify all these mortgage refinancing offers require discount points.

A discount point is defined as the fee paid to lower your mortgage refinance rate by .25 percent and is equal to one percent of your home loan amount.

Should you pay discount points when mortgage refinancing? Probably not… Remember that getting a good deal on your home loan depends on more than just getting the lowest refinance rates. You want to break even on your out-of-pocket expenses as quickly as possible. Paying discount points at closing is just more cash out of your pocket for very little benefit.

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Are You Falling For These Mortgage Lender “Sucker” Fees?

It’s no secret that the best refinance rates are at historical lows and mortgage refinancing can save you thousands of dollars in finance charges on your home. The problem for many homeowners is that they become so focused on getting the best refinance rates at the expense of fees that they throw thousands of dollars away in the process. Here are several of my best tips before you refi to help you avoid falling for lender “sucker” fees when refinancing your home.

Best Refinance Fees Online

The Internet is a great resource for mortgage refinancing information and rate quotes; however, there are a few pitfalls you’ll want to avoid. One thing you can always count on online is that people have advice for you…and most of it is really bad advice. Take for example to two percent rule of mortgage refinancing. Most financial advisors will tell you the best rule-of-thumb when refinancing is that you should never take out a new home loan unless the new interest rate is two percent lower than your old mortgage rate. Some advisors peddle a modified version of the two percent rule and tell their clients not to refinance unless the new mortgage rate is one percent lower….still bad advice in my opinion.

Should I Refinance My Mortgage?

It makes more sense to answer the question “Should I refinance my mortgage?” by evaluating the costs vs. the savings of taking out a new home loan. This is really easy to do…simply add up all the closing costs including the loan origination fee and divide by the amount your payment will go down each month. Here’s a quick example:

Suppose you’re refinancing your home for $275,000. Your old payment was based on a mortgage rate of 6.5% and was $1,740 per month. The best refinance rates available to you are 5.75% which is less than the two percent rule allows but will get you a payment of $1,600 per month. This is a savings of $140 per month. Sounds good right? Saving a $140 per month could actually be a really bad deal depending on how much mortgage refinancing will cost you. In this example we’ll say your loan origination fee and closing costs total $5,000. (Average for most homeowners) Dividing $5,000 by the $140 per month that’ll you’ll be savings reveals that it will take you 36 months, (three years) to recoup your out-of-pocket expenses.

Is this a good deal? According to the Mortgage Banker Association the average homeowner refinances every four years so you can see how answering the question “Should I Refinance?” is subjective and depends entirely on you.

What About Getting the Lowest Refinance Rates

There’s more to lender fees than just accepting what you’re quoted on your Good Faith Estimate, that’s how “Sucker” fees come into the picture. First I’d like to discuss how getting the best refinance rates fit into the equation. Once you start mortgage rate shopping you might be disappointed to find that the lowest refinance rates you’re being quoted are higher than what lenders are advertising. This happens because advertised mortgage rates assume you have a credit score of 720 or better with a favorable loan-to-value ratio.

Your actual mortgage rates depend largely on your FICO score. Here’s an illustration to show the correlation between credit cores, mortgage rates and the amount you’re paying for your home over time.

credit mortgage rate Are You Falling For These Mortgage Lender Sucker Fees?

The first thing you need to do before shopping for mortgage rates is make sure that your credit score is as high as possible. This isn’t hard to do; you can start by checking your credit reports at annualcreditreport.com for errors and paying down the balances on your credit cards. Also avoid opening new credit accounts for at least 90 days before refinancing and you’ll find what lenders are quoting you is more in line with what they’re advertising.

Never be a Sucker for Mortgage Lender Junk Fees Again

According to the HUD Secretary the number one reason most of your neighbors are overpaying for their home loans is because they didn’t do their homework before applying. Lender junk fees and overpaying the loan origination fee amount to thousands of dollars out of your pocket for no reason. Overpaying at closing lengthens the amount of time it takes to recoup your out-of-pocket expenses, often negating any benefit from mortgage refinancing.

Take the loan origination fee for example. It’s not uncommon to pay as much as three percent of your home loan amount to person arranging your mortgage refi; however, one percent is a perfectly reasonable amount to pay for this fee. Other garbage fees you’ll want to avoid include rate lock fees, application fees, third-party processing fees, and courier fees.

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You can learn more about getting today’s best refinance rates while avoiding unnecessary fees at closing by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to get you started refinancing your home without paying unnecessary lender fees.

Should I Refinance My Mortgage?

If you’re asking the question Should I Refinance My Mortgage, there are several things you need to know to make an informed decision and avoid common mortgage mistakes. The internet is a great resource when it comes to researching the best refinance rates; however, there is a lot of bad advice when it comes to answering the question “Should I Refinance My Mortgage.” Here are several tips before you refi to help you answer that nagging question.

Should I Refinance My Mortgage Now?

Conventional wisdom from the days of overpriced financial advisors states that you should never refinance your home loan unless your new interest rate is exactly two percent lower than the best refinance rates you’re qualifying. This is ludicrous on several different levels. First of all there are several perfectly good reasons for mortgage refinancing that don’t always result in a lower amount.

Secondly, the two percent rule doesn’t take into consideration how much it’s going to cost you to get the home loan (lender and loan origination fees) or how long you plan on staying in your home. There is a better way to answer the question Should I Refinance My Mortgage that takes all of this into consideration.

A Better Way to Refinance Your Home Loan

Bad mortgage refinancing advice aside, the best way to answer the question “Should I Refinance My Mortgage” is on a cost/savings basis. Assuming that your goal for mortgage refinancing is to get today’s lowest refinance rates to lower your monthly payments this isn’t hard to do. Once you’ve completed mortgage rate shopping and have collected several different quotes start by adding up all the closing costs including the loan origination fee. Divide your total costs by the amount you’ll be saving each month and you’ll know the number of months it’s going to take to recoup your closing costs and break even.

The reason recouping your expenses is so important is that you have to break even before realizing any benefit from your mortgage refi. The more you pay at closing, including lender junk fees, the longer it’s going to take to reach the point where you’re benefiting. Avoid paying lender junk fees at closing on your refi and you’ll benefit much sooner.

About Mortgage Rate Shopping

Unless you’ve been living on under a rock you’ve heard that the financial meltdown and debt fiasco in the United States has resulted in historically low refinance rates, below four percent in some cases. You might be discouraged to find that the refinance rate quotes you get are much higher than the mortgage rates you’re hearing about on the news. What gives? Why can’t you take advantage of the same interest rates your neighbors are bragging about?

Your Credit Score Is Key

You want today’s best refinance rates and to get them you need to focus on your credit score even before answering the question “Should I Refinance My Mortgage.” The reason your credit score is so important is that lenders use this number to asses your risk as a borrower. This chart shows the effect this number has on your refinance rates and the total cost of borrowing for your home loan.

credit mortgage rate Should I Refinance My Mortgage?

There are steps you can take to improve your credit score to make sure it’s not keeping you from today’s best refinance rates. Checking your credit reports for errors while avoiding opening new accounts will go a long way to make sure your credit score is where it needs to be before mortgage refinancing.

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You can learn more about getting the lowest refinance rates while avoiding unnecessary fees once you’ve answered the question “Should I Refinance My Mortgage” by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to get you started answering that all important question for yourself while avoiding common mortgage mistakes.