Refinancing Your Home? Be Smart.

You may be considering refinancing your home. It can be a way to lower your monthly payment, but be careful…not all refinance deals are created equal. Sometimes you may end up paying more money in the long-run to save a few dollars on your monthly mortgage payment.

Refinancing

Here are some tips to be sure you’re getting the best deal:

Know the Interest Rates

As you know, interest rates change daily.Before you even get started looking for a lender, spend at least a few days watching the current trend of interest rates so you’re in the know about what a lender should be offering you.

Compare Brokers and Lenders

Obtain multiple offers from brokers and lenders. Even ask for a good-faith estimate so you can review not only the interest rate, but also the anticipated closing costs. Read the fine print.

Know Your Loan Type

You have two options: a fixed-rate mortgage and an adjustable rate mortgage. Before you decide on your load, be sure you understand what is involved with these two options.

A fixed-rate loan is pretty straight forward, offering a set-in-stone interest rate with your monthly mortgage payment.

The alternative, an adjustable rate mortgage loan, allows the interest rate to fluctuate over the entirety of the loan. Be sure to know the increase caps and overall ceiling of the interest rate so you aren’t surprised if it reaches that rate. It isn’t uncommon for an adjustable rate mortgage to start with a low introductory interest rate which will increase after you assume the loan.

Be Aware of Commissions and Fees

Mortgage brokers get paid commission in different ways. Typically if you hire a broker, you will pay an upfront commission of 1% to 2% of the loan. Make sure you note if they’re paid by the lender what additional processing fees may be included.

Negotiate Commission

You may not know this, but a broker’s commission can always be negotiated. Most brokers are willing to work with fair counteroffers, so if you feel the fees are too high based upon your comparative offers, you may ask for a better price. 

Understand the Closing Costs

Closing costs are simply part of a refinance. Even though these feels most likely come out of the equity of your home, try to think of these as if you were paying them out of pocket. Be sure to weigh the monthly savings versus the closing costs.

For example, if you will save $200 a month and your closing costs are $4,000, it will take at least 20 months before you break even. It’s really important to view it this way.

Caution the No-Cost Loans

Simply put, watch out for no-cost loans. No matter what, there are costs associated with your lender or broker on every loan. If they are offering to waive these fees for you, they will be somewhere within your loan in a different form. It may be that your principal will increase or your interest rate will be higher. Either way, be sure to compare all aspects of a loan before selecting one so you’re certain the refinancing option is a smart move.

If you’re looking to buy or sell a home, contact me. I know the market, the homes for sale and those coming on the market. I would love to help you sell your home, and/or find your new home.

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