Mortgage Refinancing: How to Comparison Shop for the Best Mortgage Loan

If you are considering mortgage refinancing, comparison shopping for the best loan will save you thousands of dollars. Researching mortgage lenders and their offers has the added benefit of allowing you to avoid many common mortgage refinancing mistakes. Here are several things to look for when comparing mortgage offers.

When comparing mortgage refinancing offers, make sure you scratch your bank off the list of lenders you consider. Banks are able to exploit loopholes in the Real Estate Settlement Procedures Act that protects homeowners in the United States from predatory lenders. If you take out a mortgage refinancing loan from your bank you will overpay for the financing.

I. Start With the Annual Percentage Rate When Mortgage Refinancing

When comparison shopping for a new mortgage the lender's Annual Percentage Rate (APR) is a good starting point for your comparison. The Annual Percentage Rate factors in the base interest rate, required points, and lender or broker fees as a yearly percentage rate. The lower this Annual Percentage Rate is, the lower your mortgage refinancing costs will be. The Annual Percentage Rate does not include all fees or closing costs and should not be used solely as the basis for your decision.

II. Mortgage Refinancing Points and Lender Fees

Pay close attention to the number of points the lender is requiring you to pay in order to qualify for mortgage refinancing. Points are fee you pay the lender at closing in exchange for something, and one point equals 1% of the amount you are borrowing. Not all lenders will require points as a condition of qualifying for mortgage refinancing; however, you can use points as part of negotiating for a lower
interest rates or better conditions for the new loan.

III. Mortgage Refinancing Term Length

The mortgage refinancing term length you choose is the amount of time the mortgage lender gives you repay the loan. The amount of your monthly payment is based on the interest rate the mortgage refinancing lender qualifies you and the term length you choose. The longer your mortgage term the lower your payment will be. The opposite is also true; if you choose a mortgage with a shorter term you will have a larger monthly payment. Shorter term lengths have the advantage of building equity in your home at a faster rate and are a popular choice for mortgage refinancing.

IV. Mortgage Refinancing Prepayment Penalties

Mortgage Refinancing prepayment penalties are a fee lenders include in the loan contract to discourage homeowners from refinancing the loan. Many lenders charge a steep penalty; you will want to carefully review your current loan contract to be sure it doesn't include this penalty. Never accept a loan with a prepayment penalty when mortgage refinancing. If the lender includes a penalty with the loan you are considering and will not negotiate to remove it, consider mortgage refinancing with another lender.
You can learn more about comparison shopping for the best mortgage, including costly mistakes to avoid by registering for a free mortgage guidebook.

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Posted in: Comparison,Mortgage,Refinancing