Refinancing Tips to Save You Money
Mortgage rates have been at record lows for months now, but with the sudden drop last week, (Zillow Mortgage Marketplace reported 3.92 percent for a 30-year-fixed, the lowest rate recorded since the marketplace launched in 2008), there’s been a surge in refinancing requests.
But before you jump on the refinancing bandwagon, take a moment to do some research on how the process works, because doing so could land you a better deal. Here are some tips to get you started:
Figure out your break-even point - If you’re paying in the five percent range and you see rates in the low fours, refinancing seems like a no-brainer. But really, the first question you need to ask yourself is “How long do I plan to stay in this house?” You need to live in the house long enough to offset the costs associated with refinancing. Use a refinancing calculator to help you do the math. We’re biased towards the one on the Zillow Mortgage Marketplace iPhone App.
There’s always a cost - You may hear the term “no cost” refinancing bandied about. Well, here’s another saying you may have heard of: “There’s no such thing as a free lunch.” The hit might come in the form of higher upfront fees and a lower rate, or it may come in the form of no fees and a higher rate, but there will be a cost associated with your refinance. That’s why it’s so important to shop around in a way that allows you to compare loans on an apples-to-apples basis. A mortgage comparison site like Zillow’s enables borrowers to compare quotes from a variety of lenders across rate, APR, lender fees, and total cost of the loan, to determine which loan is really the cheapest.
Ask for the refinance rate – When you refinance, your lender is going to require that you get a new title insurance policy. Ask your title company whether you qualify for a refinance rate. Most companies will give you a healthy discount if you’re buying insurance for a property you’ve owned, say, less than five years.
Consider a cash-in refi – What you’ve heard is true: to qualify for the best rates you need to have at least 20 percent equity in your home. But if you’re one of those borrowers who is just shy of that magic number, ask your lender if you can bring some cash to the table to lock in a lower rate.
Confirm your Rate Lock – The surge in refinancing has real-life implications, and lenders are suddenly very busy with an influx of new business. Ask your lender how long loans are taking to close, and what sort of timing you can expect. Confirm that your rate is locked and will close in a specified period. It’s usually more expensive to get a longer rate lock, or a rate lock extension, but if your lender is too busy to close your loan in the specified time period, he or she may not charge an extension fee. Ask your lender about their policy. This is another good reason to check out lender ratings and reviews, you can see which lenders have the best service levels meaning, among other things, they have a great track record of closing loans on time.