When it is time to refinance your mortgage there are steps you can take to ensure you do not overpay lender fees and closing costs. Here are tips to help save you money when refinancing your mortgage.
If you are in the market to refinance your mortgage doing your homework and shopping for the best mortgage offer will save you thousands of dollars. There are a number of costly mistakes homeowners make that cause them to overpay on everything from closing costs to insurance. There are steps you can take to reduce your out-of-pocket expenses when refinancing.
Compare All Lender Fees
Mortgage lenders try and disguise their fees in the loan contracts. Mortgage lenders are required by law to provide you a “Good Faith Estimate” of all fees related to borrowing upon receiving your application. Carefully review this document and compare it to other Good Faith Estimates for all of the loans you are considering. This comparison will help prevent you from overpaying closing costs and lender feels.
Pay Points In Exchange For…
You may be able to save yourself some money by paying points on your new mortgage. Points are a fee you pay in exchange for a lower interest rate or more favorable terms on the loan. One point equals 1% of the loan amount paid at closing. If you plan on living in your home for a long time it may be in your best interest to buy down your interest rate by paying the lender points.
Avoid Private Mortgage Insurance
When refinancing your mortgage you may have the option of cashing out equity in your home. If you borrow more than 80% of your homes value, the mortgage lender could require Private Mortgage Insurance (PMI). This expense protects the mortgage lender from loss in the event of foreclosure; however, it does nothing for the homeowner except add hundreds of dollars to your monthly payment amount. You should always keep 20% of your equity intact to shield yourself from economic uncertainty.
Select a Mortgage with a Shorter Term Length
Term length is the amount of time the lender grants you to repay the loan. Mortgages with a shorter term length such as 15 years come with lower interest rates because there is less risk for the mortgage lender. Your monthly payments will be higher; however, you will pay more towards your loan principle and less to the lender in finance charges.
To learn more about saving money when refinancing your mortgage and how to avoid common homeowner mistakes, register for a free mortgage guidebook using the links below.
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Louie Latour specializes in showing homeowners how to avoid common mortgage mistakes and predatory lenders. For a free copy of "Mortgage Refinancing: What You Need to Know," which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com.
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