If you’re thinking about refinancing your home mortgage, there are many things you need to consider. Will a re-fi save you money over the long-term? Do the benefits you will receive outweigh the cost of the re-fi? The key to refinancing is to save as much money during the process as possible to maximize your savings across the board.
Find a lender that you trust. This could be the bank that currently holds your mortgage or a new lender, although your current bank is more than likely going to work the hardest for you if you have a good record of payment. Ask your friends who they use and what their experience was like in order to get a firsthand account of what you can expect.
Ask your lender about getting a “reissue rate” on your title insurance policy. While you can’t get out of buying title insurance, you can save money on a new title. Your best bet is to use your original title company, since a great reissue rate can reduce the cost of your new title insurance by as much as 70%. The availability of this rate, however, depends on how long it’s been since your original policy was issued. Homeowners who closed within 10 years or less have a better chance at a dramatic rate reduction than those who have owned longer.
Don’t get suckered in by advertised rates. You can figure that you’ll get something close to the advertised rate if you have excellent credit, but companies always bait you with the nearly impossible rates.
Be specific. Do your homework so that you understand why you want a 30-year fixed rate loan instead of being manipulated into getting a loan you don’t want or know anything about. Do you need a jumbo mortgage (more than $333,700)? Are you willing to pay points to lower your interest rate? How much is in your HELOC?
Beware of “no cost” refinancing. “No cost” never means “free” -- all it means is that there is no cost to you upfront because the closing fees are rolled into your loan. This is how many lenders sneak in more fees without you noticing. And, you will have to pay interest on these costs when they’re bundled into your mortgage.
Allow time for the process. After you file your paperwork, your information is turned over to a closing or title company for the closing details. These firms are just as busy as the lenders, especially when rates are low, so you will need to be patient. Expect the process to take 30 to 60 days.
You can expect to pay 3% to 6% of your outstanding principal balance in closing costs, so if you have very little equity in your home, refinancing may need to wait.