Should I Refinance Now Or Will Rates Drop Again?

Do you feel like you’ve missed the boat on the lowest refinance rates and are asking the question “Should I Refinance now or wait for mortgage rates to go down again?” It’s not unreasonable to question home refinance rates and fees when the so-called experts keep saying that rates have already bottomed out. So if you’re struggling with the question “Should I Refinance” here are several tips to help you and find the best deal while avoiding unnecessary lender fees.

Should I Refinance My Mortgage?

Refinance mortgage rates started going up several weeks ago. Do you feel like you missed the boat and are hoping they fall again? Recent history suggests when there’s an upturn in mortgage rates they reverse direction, even when the experts claim they’ve bottomed out. Mortgage refinance rates always seem to find a way to spiral lower.

Many financial advisors are saying a downward correction is unlikely to happen this time. The Federal Reserve is planning to cut back spending money to boost the economy’s recovery, which is why refinance rates fell so low. When news about the economy is good the bond market is weak which usually means higher mortgage rates.

The opposite is also true and one thing you can count on in this country is bad economic news, which means lower refinance rates.

Continue reading Should I Refinance Now Or Will Rates Drop Again?

Home Refinance Advice You Can Use Now

Are you shopping for home refinance rates and have your heart set on a specific interest rate? Do you know that one of the most common mortgage mistakes is focusing on getting the lowest rate at the expense of fees? Carefully comparing home refinance offers and fees from a variety of lenders is the best way to ensure you’re not losing money when refinancing. Here’s how to comparison shop today’s best mortgage lenders and get a better deal than your neighbors for your next home loan.

Home Refinance Rate Shopping Tips

Here are five tips to help you get the lowest home refinance rates without overpaying lender fees at closing.

  1. Check Your Credit Reports First
  2. Before you start filling out forms for home refinance quotes you should focus on your credit. If you don’t, you’ll often find the quotes you’re getting are higher than what lenders are advertising. If so, the likely culprit is your credit score, assuming you have the necessary loan-to-value ratio. Nothing drags down your credit score like inaccurate information in your credit file.

    The government requires each of the three credit bureaus (Trans Union, Equifax, Experian) to provide you with access to your credit files once per year, at no charge, at AnnualCreditReport.com. You won’t get a credit score unless you pay for it; however, CreditKarma.com provides free access to your Trans Union credit score with no strings attached.

    Are you happy with your credit score? If you’re not, the quickest way to boost it is to pay down the balances on your credit cards below 30% of your limit.

  3. Request Home Refinance Quotes The Right Way
  4. The new Good Faith Estimate is an excellent tool for comparing home refinance rates and fees if used correctly. There’s two things you’ll need to do to make sure you’re getting an apples-to-apples comparison of home refinance fees with your quotes.

    First, make sure your quotes do not include discount points. There is a table on page three if you’d like to see if paying discount points is worthwhile; however, as a starting point make sure your home refinance quotes do not include points.

    Next, make sure all of your quotes are for the same mortgage program. If you need a 30-year fixed rate mortgage don’t let some fast-talking loan officer quote interest rates for a 30-year ARM. Comparing fees across different programs is like comparing apples to oranges and results in overpaying.

  5. Is Refinancing Worth It?
  6. Answering the question “Should I refinance?” before you do anything else can help you avoid an expensive mistake. You can figure out if a home refinance is worthwhile using a simple mortgage calculator like this one to approximate your break-even point.

    Simple Mortgage Calculator

    Loan Amount: Years: Interest Rate:

    Annual Taxes: Annual Insurance:

    Monthly Payment =

    Once you have an idea of what home refinance rates you’ll qualify and your approximate closing costs you can calculate your break-even point. First, determine what your new payment will be based on the refinance rates found on your Good Faith Estimate. The difference between your old payment and the new is your monthly savings.

    Divide your average closing costs by the amount you’ll be saving each month and this tells you the approximate number of months it’s going to take to recoup your out-of-pocket expenses. Assuming you break even and you’re comfortable with the amount of time, then a home refinance is probably worthwhile.

    Note that this is only an approximation because it doesn’t factor in changes in term-length or things like taxes. As long as you’re keeping the same term-length or going shorter it’s still good enough to make an informed decision if refinancing is worthwhile.

  7. Shop From a Variety of Lenders, Banks, & Credit Unions
  8. Don’t automatically assume that your bank is going to offer you competitive refinance rates and fees. Some of the best deals I’ve found have come from small community
    credit unions. Mortgage brokers can be an excellent resource for home refinance shopping if you don’t have the time to comparison shop.

    Also, don’t let the fact that you’re not a credit union member discourage you from rate shopping credit unions. Many credit unions relax their membership requirements so they can market home loans beyond their local membership base. The more comparison shopping you do the better your chances of finding a great deal.

    The only catch with home refinance rate shopping is that you need to take steps to protect your credit score from lender inquiries. When a mortgage lender runs your credit you’ll get a hard inquiry on your credit report which lowers your score. The trick is to limit all of your home refinance rate shopping to a 14-day period and you’ll only get dinged on your credit once. Make sure when you’re requesting quotes that you provide your Social Security number and that you limit quotes to that two week window.

  9. Use Your Good Faith Estimate to Compare Fees
  10. The loan origination fee is one area where you can save or lose the most money on your home refinance. Many loan officers will tell you that one percent is standard for the mortgage origination fee; however, I’ve seen community credit unions charge as little as $400 for loan origination. You can find the loan origination fee on page two, item one of section A of the Good Faith Estimate.

    The next thing you’ll want to consider on your Good Faith Estimate is the Yield Spread Premium found in item 2 of section A. This is a credit the lender is giving you for accepting home refinance rates that are higher than the going rate. The credit is used to pay your loan origination fee and other settlement costs.

    The problem with accepting Yield Spread Premium on your home refinance is that while it reduces or even eliminates your out-of-pocket expenses, it drives up your monthly payment. If you plan on keeping the mortgage for any length of time (the average homeowner refinances every 4-5 years) you’ll break even for what the lender credited you and start losing money.

    In most cases you’ll want to pay your own closing costs if you’re able. The exception is if you know you’re going to be selling within five years and can avoid a prepayment penalty.

    Home refinance closing costs average two to three percent of your mortgage amount. The less you pay for loan origination and the lender fees found on page two of your Good Faith Estimate the more you’ll benefit from current mortgage rates.

Invest an hour or two using these tips and you can shave thousands of dollars from your out-of-pocket expenses on your home refinance.

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You can learn more about paying less refinancing with today’s best mortgage lenders by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to help you get the lowest home refinance rates from today’s best mortgage lenders…”

Home Refinance Tips Your Lender Will Wish You Didn’t Know

Are you considering taking advantage of current home refinance rates? Whether or not you’re getting a good deal for your next mortgage loan depends on the fees you’ll pay, not just on how low the refinance rates. Here are several tips before you refi to help you get the lowest home refinance rates without overpaying the lender at closing.

Home Refinance Settlement Fees

Every home loan has settlement fees that have to be paid one way or another at closing. Even those no-fee refinance offers have closing costs; the fees are being paid by the lender in exchange for you agreeing to higher home refinance rates.

The reason lender fees are so important on your home refinance is that you have to recoup your out-of-pocket expenses before you’ll benefit from having a lower interest rate. The more you pay at closing for things like the loan origination fee the longer it’s going to take you to break even.

Part of answering the question “Should I Refinance my home” is figuring out how long it’s going to take you to break even recouping your closing costs.

How to Calculate Your Home Refinance Break-Even Point

It’s not difficult to approximate your home refinance break-even point. You can use a simple mortgage calculator like the one below to figure out how much your monthly payment will be going down after your home refinance. Simply plug in the refinance rates you’re being quoted and your desired term-length and click the calculate button.

Simple Mortgage Calculator

Loan Amount: Years: Mortgage Rate:

Annual Taxes: Annual Insurance:

Monthly Payment =

Once you know the amount that your payment is going down each month after your home refinance, divide the total closing costs found on your Good Faith Estimate by your savings. This will tell you the approximate number of months it’s going to take to break even recouping lender fees on your home refinance.

This is only an approximation because it doesn’t take into consideration factors like income taxes and changes in your mortgage term length; however, as long as you’re not lengthening your term-length the approximation is good enough to make an informed decision.

Are you okay with the amount of time it’s going to take recovering your closing costs from your home refinance savings? If so, then paying for mortgage refinancing probably makes sense in your situation.

What About Those No Fee Refinance Offers?

You’ll see lenders like Bank of America advertising no fee home refinance loans from time-to-time. If you don’t have the cash to pay your settlement fees at closing these offers might seem like your only option. There is an alternative to accepting higher refinance rates, which means your payments will also be higher than necessary.

Many lenders will let you roll your closing costs into your loan balance meaning you’ll get to take advantage of current home refinance rates without markup.

You’ll find the credit you get for taking higher home refinance rates on page two of your Good Faith Estimate. Look at section A item 2. “Your credit or charge (point) for the specific interest rate chosen. The first box reads “The credit or charge for the interest rate of % is included in “Our origination charge.” (See item 1 above.)”

This credit is known as Yield Spread Premium and works like a discount point in reverse. For every .25% markup on your home refinance rates that you agree to the lender credits one percent of your mortgage amount towards your settlement fees.

Is agreeing to Yield Spread Premium on your home refinance a good idea? You can run the numbers using a simple mortgage calculator to figure out how the markup affects your monthly payments; however, the longer you keep this home loan the more you’ll wind up overpaying the lender down the road.

Should You Pay Discount Points?

Discount points are a fee leftover from the 1980s when homeowners were paying double-digit interest rates. You could pay one percent of your mortgage loan amount at closing and the lender would lower your rate by .25%.

Today home refinance rates are still near historic lows making the benefit of paying discount points extremely small. If you’re curious how paying discount points will affect your payments there is a table on page three of your Good Faith Estimate but most homeowners do not benefit from paying this fee. Make sure the home refinance quotes you get as a starting point are zero point quotes.

How to Shop For the Lowest Mortgage Rates & Fees

The first step to getting the best deal on your home refinance is to choose a mortgage program. Do you need a 30-year fixed rate home loan? How about an FHA streamline refinance? Once you know which mortgage program that you need don’t let loan officers quote interest rates from programs you’re not interested in.

The only way to get an apples-to-apples comparison of mortgage lender fees is to compare quotes from identical programs.

Next, look at the loan origination fee. This is paid to the mortgage company or broker arranging your home refinance. Many loan officers will tell you that one percent is standard for the mortgage origination fee; however, I’ve reviewed several community credit unions that charge as little as $400 for their loan origination fee.

Remember, the less you pay at closing the more benefit you’ll get from your home refinance.

Finally, look at the fees found on page two of your Faith Estimate in section B. Comparing these fees from a variety of banks and credit unions will give you a good idea of what’s reasonable and what is outlandish. Mortgage fees tend to vary significantly from one lender to the next so don’t assume giants like Wells Fargo Mortgage are going to offer the best deals.

The most common mortgage mistake is focusing on getting the lowest home refinance rates at the expense of lender fees. If you’re shopping for the lowest interest rates and lender fees using the Good Faith Estimate you’re on track to get a better deal than 90% of your neighbors.

Click Here For More Details…

You can learn more about paying less for your next home refinance while avoiding lender junk fees by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to help you get the lowest home refinance rates from today’s best mortgage lenders…”

How To Compare Current Mortgage Rates & Get The Best Deal

If you’re looking for current mortgage rates on the web, it can be pretty confusing out there. How much benefit you’ll get from refinancing with today’s mortgage rates depends on how you go about shopping for your next home loan. Here are several tips to help you avoid common mistakes that steal the benefit you get from refinancing with the lowest current mortgage rates.

Current Mortgage Rates Can Be Deceiving

The rates you see published on the web and advertised on television can be deceptive because they’re not telling the whole story about the fees involved unless you can speed read the fine print. Lenders advertise teaser rates to suck homeowners into overpriced home loans.

“Wait…” you might be thinking, if current mortgage rates are so low how can the mortgage be overpriced? Mortgage lenders are in the business to make money and they don’t do it by just sitting back and collecting the interest on your home loan payments. If you want the best deal on your next home loan and the most benefit from current mortgage rates it helps to understand how lenders profit.

Mortgage Lender Fees Make or Break Your Deal

If you’re shopping for current mortgage rates to refinance you should also be focusing on the fees found on your Good Faith Estimate. The most common way that lenders manipulate current mortgage rates that results in overpaying is with discount points.

Did you pay a point or two when you first purchased your home? Depending on what was going on in the market at the time when you bought your home this could have been a waste of money. Should you pay discount points with today’s current mortgage rates? For most homeowners the answer is absolutely not.

You see, discount points are just a fee left over from the 1980s when homeowners were paying double-digit mortgage refinance rates. Back then it made sense to pay this fee to buy down your interest rate because the savings allowed you to recoup your out-of-pocket expenses in a fairly short amount of time.

The problem with current mortgage rates being at historically low levels is there’s nothing quick about the way you recoup the expense, if at all. Also, the benefit you’re getting by lowering your interest rate is proportionally lower, meaning you’re getting much less bang for your buck.

The problem is that paying discount points offers next to no benefit for anyone but mortgage lenders. This fee is pure profit for lenders which is why they quote current mortgage rates that include discount points first.

If you’re curious about how paying discount points affects your payment there is a chart on page 3 of the new Good Faith Estimate; however, as a starting point you should always request zero discount points when comparison shopping current mortgage rates.

How to Shop Smartly Using The Good Faith Estimate

Before you do anything else you can save yourself a lot of financial frustration by staying on top of your credit reports. If you haven’t already been to AnnualCreditReport.com for free credit reports you should go there before doing anything else. AnnualCreditReport.com is a government mandated website where the three credit bureaus (Equifax, Experian & Trans Union) are required to give you free access to your credit reports.

If you want to see your credit score there is a fee; however, CreditKarma.com seems to be an excellent alternative to those “free credit score” websites that charge you for credit monitoring services. (CreditKarma has clever TV commercials too)

Once you’re confident that your credit reports are accurate you can give your credit score a quick boost by paying down the balances on your cards below 30% of your limit. CreditKarma.com also offers free advice and community support on improving your credit profile.

Understanding The New Good Faith Estimate

The government recently overhauled the Good Faith Estimate (GFE) and the new version is vastly superior to the old GFE when it comes to shopping for current mortgage rates. Most of the fees you’ll want to pay attention to can be found on page two of your Good Faith Estimate starting with the loan origination fee.

Many mortgage brokers will tell you that one percent is the standard amount to pay the person or company arranging your home loan; however, I have reviewed community and military credit unions that charge as $400 flat for the mortgage origination fee. Remember, the less you pay obtaining your next home loan the more benefit you’ll get from current mortgage rates.

The next item on your Good Faith Estimate (item two in box A) is mortgage yield spread premium. Every now and then when I write about yield spread premium I get a snarky comment from someone saying that yield spread premium is illegal now and that I should do my homework. Fact of the matter is that yield spread premium is NOT illegal. The only thing that changed is that mortgage brokers cannot charge you a loan origination fee AND take yield spread premium from the lender. (The days of double-dipping mortgage broker commissions are gone for good.)

Yield spread premium is alive and well. Are your eyes glazing over as you think yield spread what?! It’s just a fancy name for a pretty simple concept. Mortgage lenders pay a premium for borrowers that accept interest rates higher than the current mortgage rates. This premium is a credit known as yield spread premium. You can use the premium to pay your loan origination fee and other closing costs. Just how much do you get for taking higher than current mortgage rates?

Yield spread premium works like discount points in reverse. For every .25 percent increase you agree to above current mortgage rates you get a credit of one percent of your loan amount towards your closing costs. This is the “credit or charge for the interest rate of x%. This REDUCES your settlement charges” that you see in box 2a of the new Good Faith Estimate. Again, yield spread premium is alive and well, just read your Good Faith Estimate.

Should You Agree to No Fee Refinancing?

Yield Spread Premium is how lenders like Bank of America offer no fee or no cash out of pocket mortgage refinancing. What are you giving up by agreeing to higher than current mortgage rates? Your payments will be higher for the entire time that you keep the home loan meaning you’ll eventually be overpaying significantly for having your closing costs paid by the lender. If you’re short on cash and having the lender pay your closing costs is your only option go for it; however, for most people it’s better to pay the loan origination fee and other settlement charges yourself.

How Long Before Breaking Even?

Some financial advisors like the Mortgage Professor claim it’s a mistake to look at how long it’s going to take you to break even when weighing your refinancing options; however, I disagree with their arguments. While it’s true that dividing your total mortgage fees by the amount you’ll be saving each month only approximates your break-even point because it doesn’t factor in things like term length and taxes, it’s still good enough an approximation for most people to make an educated decision.

You can figure this out for yourself by using a simple mortgage calculator to determine your new payment amount and then divide your out-of-pocket expenses by the amount your mortgage payment is going down.

Simple Mortgage Calculator

Loan Amount: Years: Mortgage Rate:

Annual Taxes: Annual Insurance:

Monthly Payment =

This tells you the number of months it’s going to take to break even recouping your closing costs and if you’re comfortable with this amount of time them refinancing with current mortgage rates on the offer you’re considering probably makes sense.

Click Here For More Details…

You can learn more about getting the most benefit from today’s current mortgage rates by avoiding unnecessary lender fees by checking out my free Underground Mortgage Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
  • Get My Underground Mortgage Videos
Here’s a quick sample to help you avoid paying lender junk fees by shopping smartly…

How To Get The Best Refinance Rates

Want to get your hands on today’s best refinance rates but don’t want to pay for a new mortgage loan? While it’s true that the fees you pay make or break the deal you’re getting there are steps you can take to make sure you’re getting the best refinance rates. Here are several tips to help you find the best refinance rates while avoiding unnecessary lender and junk fees.

Want the Best Refinance Rates? Start Here First.

Before you start shopping for the best refinance rates it’s important to make sure your financial affairs are in order. If you’ve already started shopping for a new mortgage and are finding the refinance rate quotes you’re getting are higher than what lenders are advertising the likely culprit is your credit score.

The first step in getting your financial fairs in order starts with your credit report.

How to Get Free Credit Reports

Congress passed a law several years back requiring the credit bureaus to provide you free copies of your credit report every year. You won’t get a credit score with them but you can get your free credit reports by registering with AnnualCreditReport.com.

Once you’ve accessed your credit reports you’ll want to carefully review them for errors. If you find mistakes each of the three credit bureaus (Equifax, Experian & TransUnion) has an online process for disputing mistakes.

When you’re certain that your credit reports are accurate you can focus on your credit score. Most credit unions offer low cost credit monitoring services that allow you regular access to your credit score if you’re a member. How high does your credit score need to be? Most lenders base their advertised rates on having a score of 720 or better.

Which credit score do mortgage lenders use? Lenders typically use your FICO score, named for the Fair Isaac Company that created credit scoring.

You’ll find that you have three credit scores based on your credit reports from TransUnion, Equifax and Experian. Mortgage lenders use the “middle” score when determining your eligibility for the best refinance rates. If your credit scores are 640, 700 and 720 your “middle score” is 700. Mortgage lenders do not round or average credit scores.

How to Boost Your Credit Score

If you want the best refinance rates for your next home loan you need to make sure your credit score is up to snuff. Here are several tips to quickly boost your credit score.

  1. Always Pay Your Bills on Time
  2. Never, ever miss a payment deadline. Set up auto billing or use your bank’s online bill pay to make sure your bills are paid on time. Nothing sinks your credit score faster than missed or late payments.

  3. Pay Down Your Credit Card Blances
  4. The fastest way to boost your credit score is to pay down and maintain the balances on all of your credit cards below 30% of your credit limit. If you don’t have the cash on hand to pay down the balance one strategy is to ask the credit card company to raise your limit.

  5. Avoid Department Store Charge Cards
  6. Store charge cards are the worst kind of debt you can have on your credit report. Avoid opening new store charge cards and if you’ve already got them pay off the balances but do not close the account.

  7. Avoid Cancelling Credit Cards
  8. Do you have credit cards that you never use? Make sure that you pay down the balances but do not close the accounts. It helps to use the cards periodically as long as you keep the balance below 30% of the available credit.

  9. Time Heals Everything
  10. If you have negative information in your credit reports the information will drop off eventually. Avoid paying those “Credit Repair” companies as there is little they can do besides take your money.

Shop Smartly for the Best Refinance Rates

Are you happy with your credit score? Many homeowners try and protect their credit score when shopping for the best refinance rates by refusing to give out their social security number.

If you do this you’re relying on the loan officers “best guess” when quoting mortgage rates and probably wasting your time. It’s true that your credit score takes a ding when mortgage lenders run your credit, this is unavoidable. You can however manage the damage by limiting all of your inquiries to a two week period.

If all of your mortgage lender inquires fall within a two week period your credit score will only get “dinged” for one inquiry.

Click Here For More Details…

You can learn more about getting the best refinance rates while avoiding lender junk fees by checking out my free Underground Mortgage Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
  • Get My Underground Mortgage Videos
Here’s a quick sample to help you shop smartly from today’s best mortgage companies