October 21st, 2016 8:49 AM by Jackie A. Graves, President
Shopping for a
mortgage can be about as much fun as going to the dentist.
And after going through it once, the thought of doing it all over again with a
mortgage refinance might feel more akin, in fact, to getting a root canal.
A long, complicated root canal.
We know it’s not the kind of thing anybody wants to do. But refinancing can be
lucrative; we’re talking major cash—right in your pocket. In fact,
American homeowners are missing out on at least $13 billion a year by not refinancing their mortgages.
And, just like when you did it the first time, it pays to shop around. Sure, your current lender might be the
best bet. But if you don’t look at other options, you could be leaving money on
Here are some things to consider when shopping for a mortgage refinance—and some tips to make
it as painless as possible. (You’re on your own with the root canals,
Of course this is the first question to answer. And it’s likely
you do, since mortgage rates are currently hovering around all-time lows.
We’ve got a handy calculator that
can show how much money you can save if you lower your rate by even as
little as half a percentage point. Say, for example, you’ve got a $300,000
mortgage. With a 3.5% rate, you’d be paying roughly $1,450 each month. Lower
that rate by a mere half percentage point, to 3.0%, and your payment dips to
$1,387. Of course, you would gladly accept an extra $100 a month, plus you’d
pay about $22,000 less in interest over the life of the loan.
You already have a mortgage, and it seems so easy to just stick with that provider.
And that can be a great option, says Bob
officer at Radius Financial Group in Boston, provided you’re happy with their
“Often I find that people think about refinancing because they
get a letter in the mail or hear a radio ad, and their ears perk up at the
amazing rates that are quoted,” Melone says. “But what borrowers fail to
realize is that getting those quoted rates might require something crazy like
50% equity in the home and a near-perfect credit score. By starting the conversation with
your existing lender, you can sort through conflicting information with someone who is giving it to you straight.”
Maybe you feel that your current lender isn’t doing enough
to woo you. And perhaps there’s someone else out there who could give
you what you want—which is, in most cases, a lower rate.
This is especially true if you’re currently working with a big
“A consumer would be smart to consider a direct lender who
services their own loans,” says Luis
Hernandez, branch manager and loan originator for New American
Funding in Chicago.
That means that whoever is processing your refinance is also
going to work with you through the life of your loan. In addition, he
adds, direct lenders might be able to offer a zero-closing cost refinance,
since they’re interested in developing long-term relationships with clients.
Worried about the deluge of paperwork that a new lender might
require? The stack of paperwork is likely to be similar even if you stay with
your existing lender.
With so many lender options available, how do you know where to
begin? Melone recommends talking to a local real estate agent whom you
“They not only know whose rates may be the most competitive, but
also who the better mortgage loan officers are—those who will take the time to
talk you through the details of the loan you are considering,” he says.
And although we’re advising you to shop around, beware of
casting too wide a net. Limit your search to two to three lenders to
avoid becoming overwhelmed.
“If you get a good feeling from them, I would stop there,
because they are giving you enough of an overview of what’s out there without
completely confusing you,” he says.
“Most lenders will provide you with a detailed report so you can
see what the fees are and can compare apples to apples,” Hernandez says. Here’s
what you should pay attention to:
Like what you see? Ask for a “loan estimate,” the official
document that binds a lender to the terms for 10 days.
with that, your shopping is done. All that’s left is to decide is how you’ll
spend that “raise” you’ve earned.
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