Explain Refinancing A Mortgage

Mortgage Refinancing -- What They Didn't Teach You In School

If you are looking to refinance your mortgage for the lowest monthly payment at the least cost, you must be prepared to ask specific questions.

Now here's the catch. If you don't know what you want, how will you know the questions to ask? Asking the best questions depends on knowing what you are trying to accomplish and being prepared to express it in two or three brief sentences.

Explain Refinancing A Mortgage - What Not To Ask

First let's consider a common sentence uttered when hunting for a home mortgage refinance. "Hi, I should let you know I'm shopping for the lowest mortgage rates." Wouldn't this confuse a lender as to your actual purpose? Who would call a mortgage company asking for a mediocre interest rate! Everyone desires the lowest rate.

Explain Refinancing A Mortgage - Three Examples

So let's examine how to express the specific reason for your refinance. These are three examples.

• Increasing adjustable rate mortgage payments may be looming over you.
• Another reason may be that your current fixed rate mortgage is high relative to today's rates and you are hoping that you can take advantage of the current interest rate environment.
• A further example may be a cash out loan for necessary improvements and repairs around the house.

Explain Refinancing A Mortgage - Consider What You Want Before You Call

Begin with the obvious. Know what you want before you call the mortgage lender. It is without question that a broker already assumes the best deal is your underlying priority. Help by giving specific reasons for your home mortgage refinance.

Explain Refinancing A Mortgage - Best Practice

Best practice calls for checking with two to three mortgage lenders. This is important even if you already have a company in mind. A few more minutes spent upfront should reward you well in the end.

Explain Refinancing A Mortgage - Cheat Sheets

Prepare a cheat sheet with questions you would like answered. Your cheat sheet should focus on the main topics of current interest rates, length of the loan, prepayment penalties, total costs involved, time to process, and estimated monthly payments including taxes and insurance.

Explain Refinancing A Mortgage - Rate Quotes

Ask your loan officer to quote mortgage rates as if someone were locking in an interest rate on the specific day of your conversation.

Explain Refinancing A Mortgage - Prepayment Penalty

Just as crucial, remember the prepayment penalty issue. A prepayment penalty is a fee charged by the lender to pay off your loan early or in some cases, for reducing the loan balance faster than its normal amortization schedule. Even without plans to accelerate pay-off, you still need to know the answer to this question.

So no matter how simple you might think it sounds, always ask about a prepayment penalty. All borrowers deserve to know what their home mortgage refinance has in store for them.

Explain Refinancing A Mortgage - Good Faith Estimates

When it comes to costs, a written Good Faith Estimate is your best indicator. If you are comparing programs such as a 30 year fixed rate mortgage to a 15 year fixed rate mortgage, you need a Good Faith Estimate for both products.

Ask for a GFE before loan application and prior to ordering your credit report. Even as an initial estimate, important details regarding interest rate, fees, and monthly house payments will be disclosed on a Good Faith Estimate.

Requiring a GFE is the best way to compare loan products as well as evaluating lenders.

Explain Refinancing A Mortgage - No Cost Mortgage Refi

Lastly, keep in mind that a no cost refinance does in truth cost. Even if you don't pull out your wallet, it still carries a price. Most of the time a no cost home mortgage refinance simply means the fees were folded into a higher loan amount or greater than current interest rate.

Explain Refinancing A Mortgage - Do Your Homework

Isn't it time to quit allowing dollar signs and jargon to overwhelm you? I'm confident you can lasso mortgage closing costs once and for all.

So why NOT do your homework before beginning a refinance? After all, it is all about your home and your mortgage. You deserve the best!

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Article No.140 by Kate Ford, real estate insider and author of Ask Kate. If you enjoyed this article, you will like Advice For Buying A Home - How To Send Signals also.