Refinancing Your Home Mortgage - What You Need to Know
Most consumers view refinancing as a money saving process. After all, the benefits from refinancing a loan can be outstanding; reduced interest rates, lower monthly payments, cashing in on equity for home improvements, perhaps a shorter loan term. Sounds great right? Before you dive in head first, there are some things that you need to know so you can get the best possible deal on your refinance. As you navigate through the refinance process, keep in mind that mortgage lending is a retail business. Chances are that your local mortgage company is providing you with a loan product that generates a commission for the person who facilitates the transaction. In theory, you pay a fair fee for services rendered and walk away with a fair deal. What you need to watch out for is a little lending industry trick called yield spread premium. When you apply for your refinance, your credit history qualifies you for a specific interest rate based on your credit history. In many cases, the mortgage broker and or company is offered an additional bonus payment up to 1% of the loan amount for every .25% that is added above any beyond what you qualify for. This means that you could end up paying a higher rate than what you actually qualify for with the difference being pocketed by the mortgage company. Another thing to watch out for is pre-payment penalties. This is something that you want to avoid at all costs. There is enough competition in the lending market that you will be able to find an option that doesn't involve a pre-payment penalty. After all, why should you be required to pay additional fees just to pay off your loan? Don't walk away from a loan immediately if you see a pre-payment clause. Often times you can simply ask the lender to waive the penalty. How can you protect yourself from a bad deal?
The internet is a great tool for leveling the playing field between mortgage companies and consumers. The best thing you can do is to shop around and compare loan products from a number of different lenders. There are numerous websites that will allow you to obtain fast and free refinance quotes without checking your credit. Start by requesting a free quote and then negotiate with each provider until you find an offer that you are happy with.
Remember, it's free to request a quote and you are never obligated to do business with any particular lender just because you submitted a request for information.
Use this quick and easy form to start your search:
