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Mortgage Refinancing Tips
Refinancing your home mortgage can come with some great perks.
If you do it with no money out of pocket, you can skip one to three
mortgage payments. You can save money on your payment or pay off
your entire mortgage faster when you have better terms. Here are
a few things to pay attention to when you refinance your mortgage
loan, to make sure that you don’t overlook anything that you
might regret, or that can cause you problems later:
1. Apply for a pre-approval to many different lenders to make sure
you are getting the lowest rate possible. When you do this, make
sure that with the initial pre-approval application, the lender
is not pulling your credit history. You will want to reserve your
credit pull for the lender that you are most likely to work with.
You can decide that after you have gone through the preliminary
pre-approval process with a few lenders. Each time your credit is
pulled, it docks your credit score just a little. If you have too
many inquiries, it could keep you from refinancing your mortgage
loan with the lowest rate possible. When you pre-apply for home
mortgage loans online, most lenders or mortgage service companies
will not initially pull your credit. Check for information about
this on their website. They will usually tell you whether or not
they are going to pull your credit. Also, if on the application
you do not give them your social security number, they cannot pull
your credit. If, on the application, they ask you to describe your
credit, they are probably not pulling your credit.
2. Make sure that your original mortgage does not have a pre-payment
penalty or early payoff penalty of any kind. Sometimes people will
get into their mortgage with the mortgage having a pre-payment penalty
and they will not even know about it. Pre-payment penalties usually
range from 6 months to 3 years with a penalty for an early payoff.
The penalty is usually about the amount of 6 months worth of your
mortgage loan interest, but this varies. You would have to be able
to have some significant payment and interest savings on your refinance
loan to justify refinancing a mortgage loan with a pre-payment penalty.
3. When evaluating different lender offers, in the mortgage loan
pre-approval process, pay closest attention to the interest rates
they are offering & the closing costs. These are the two biggest
factors that will help you figure out which lender is right for
you. If one of these two factors is too high, it could offset the
benefit of refinancing for you.
4. Get your interest rate and closing costs in writing as soon
as you decide on a lender to work with. Get your lender to give
you a commitment in advance of all of the costs that will be involved
with your loan. Find out if the refinance loan you are getting has
a pre-payment penalty as well. Sometimes lenders will leave out
important information like this, if they think it might scare you
away from refinancing with them.
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