Refinancing Tips
Since mortgage rates are extremely low and many people are refinancing, I wanted to write the following to help people when comparing lenders and deciding who to go with.
It is important to get at least three quotes to base your decision on and it is best to get these in writing. Ask for a good faith estimate which will allow you to better compare the different products.
Next, you really need to get the quotes in the same time frame. Rates are constantly fluctuating so one lender's rate from two days ago may compare unfavorably to your latest quote. If that is the case, you should check back with the other lender because it is entirely possible that the rate went down.
The big factor in refinancing is the closing costs. If you are paying $3,000.00 in closing costs and saving $75 a month on your current payment, it will take 40 months for you to see the savings. If you sell your house or refinance again in the interim, it may not have been worth it. Another option is a no closing cost refinance. If there are no closing costs, your interest rate will be higher. The way to compare the two is to take the difference in monthly payments and divide that into the closing costs. For example if you can refinance a $200,000 loan at 5.25 and pay no closing costs, you will be paying $1,104.41 per month. If you refinance the same loan at 5% (with $1,500.00 in closing costs), you will be paying $1,073.64 a month. The difference is $30.77 a month so in this example it would take over 4 years before having the lower interest rate would be worthwhile. If you are planning to move in that period of time, it is probably best to go with the higher rate and no closing costs. On the other hand if the difference can be made up in 10 months, it is probably best to go with the lower rate. Everything depends on your particular situation.
When comparing lenders, do not pay attention to their quotes for attorney's fees, title insurance and recording fees. You select the attorney and title insurance and recording fees should be the same no matter which lender youuse. Similarly, any amounts listed as escrows (or reserves deposited with lender) will be the same. The only fees you should be comparing are the lender fees (typically listed in the 800 section of the Good Faith Estimate). Finally, never be afraid to negotiate with the lender. Maybe you like one lender a little better but they have slightly higher fees. Tell them what you were quoted by the competition and see if they will match it or give you a credit.
If I can ever assist by offering an objective look at the estimates, please do not hesitate to call.
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| Disclaimer: This is a publication of Rosner Law Firm P.A. Information provided is intended for general information purposes only, and does not constitute legal advice. For legal issues that arise, the reader should consult with legal counsel. |