Pros & Cons of Refinancing Your Mortgage – Michial Rachaner
BEWARE by being AWARE
Mortgage rates continue to hold strong, near all-time historic lows. Now may be the perfect time to refinance your current mortgage, but before you commit to that process here are some important things to consider.
Unfortunately, the refinance part of the mortgage industry can be scary. It’s a space full of salespeople that are focused on closing as many loans as possible. This hunger for closed loans often messes up their morale compass, compelling them to put their needs ahead of the needs of their potential clients. The truth is refinancing is not the best choice for everyone. It is expensive, and often the benefits do not out way the costs. So, how can you know that the mortgage person you are talking to has your best interests at heart? Here are a few ways to tell…
- Pay attention to the questions being asked. A mortgage professional will not only work to qualify you for a loan but also ensure that any potential loan is perfectly aligned with your personal and financial goals. Ask yourself, are the questions being asked getting to the heart of my situation? If you are providing all the important information without being asked, that is a red flag.
- Read online reviews. Often the best way to gauge a mortgage professional’s true intentions is to read about past experiences others have had. Google is often the number one place to seek out such reviews. Other places might include Zillow, Facebook, and other similar sites. Look for reviews that have been responded to also. This is a strong indicator that the mortgage person is engaged with his or her clients.
- Understand what separates one lender from the next. Many times, sales-focused mortgage folks will try to ‘sell’ you in deceptive ways. Be sure you understand what truly matters when comparing one lender to the next. That list is short with 4 main things to compare…
- The rate
- The points being charged to get a rate
- The lender fees
- The expertise of the mortgage professional
Top 4 Things to Consider While Refinancing Your Mortgage
Understanding what separates one lender from the next
Many times, sales-focused mortgage folks will try to ‘sell’ you in deceptive ways. Be sure you understand what truly matters when comparing one lender to the next. That list is short with 4 main things to compare…
- The rate – In the end, your rate is what matters the most. This important factor will not only impact your payment today but also the interest burden you will pay for years to come. A mortgage refinance professional should give you their best rate quote the first time; however, it is not unusual for other lower rates to be available with other mortgage refinance companies. For this reason, it is a good idea to ‘shop’ for your rate, forcing mortgage companies to fight for your business. Some companies even offer ‘Best Rate Guarantees’ like Ready Rate. This Florida-based mortgage company will match any competitors’ terms and always beat that competitor’s rate. All you must provide to them is a loan estimate that confirms a locked-in rate. Check them out at www.ReadyRate.com.
- The points being charged to get a rate – Points are a one-time fee you can pay at the closing of your loan in order to get a better rate. Points are always reflected in Box A on a Loan Estimate and a Closing Disclosure. In rare cases, points may be required just to get a rate, however, the decision to pay points is usually completely voluntary. When a mortgage refinance professional gives you a rate quote, if points are a part of that quote, they should tell you that upfront. Unfortunately, this often does not happen. These sales folks hope you will be lured in by the low rate. They know you will eventually see the points on future disclosures, but they hope by then you will be far enough into the process that you decide to just go for it. This is a red flag, and time to move on to another mortgage refinance company.
- The lender fees – There are a lot of ‘fees’ when doing a refinance, but the only one that is driven by the mortgage company is their lender fee. This fee is always reflected in Box A on a Loan Estimate and a Closing Disclosure. The lender fee may have many different names and be listed on more than one line item. Names may include Underwriting Fee, Processing Fee, and/or Application Fee, just to name a few. Typically, lender fees will range from $900 – $1900. Mortgage companies will rarely waive these fees, but it never hurts to ask. A select few mortgage refinance companies that have no lender fees, such as RP Funding and Ready Rate, and those companies should be commended for helping to take ‘greed’ out of lending. It is important to recognize that all other fees related to a mortgage are property-related and driven by a third party to the transaction. Third parties might include Title Companies, Local Municipalities and Governments (that collect Taxes and Service Fees), Survey Companies, and Appraisal Companies, just to name a few. All these non-lender fees will ultimately be the same regardless of the mortgage refinance company that you pick. This is where some mortgage folks underestimate those third-party property-related fees, in order to make themselves look less expensive. Be careful not to fall for that trap, and if you recognize it this is a red flag too.
- The expertise of the mortgage professional – After talking to a mortgage professional you should feel encouraged, confident, and clearly focused on an objective. If you feel this way, then you can be confident you spoke to someone who most likely knows what they are doing. A mortgage professionals’ expertise is your advantage. The questions that they ask, the way that they listen to and analyze your responses, the way they mold the conversation to recognize and embrace what’s important to you, all these things are of the utmost importance. If at the end of the conversation you feel pressured, lost, uncertain, or confused, beware. This is a red flag, and as they say, it is probably time to get a second opinion.
By Michial Rachaner, CEO of Ready Rate
(a Florida based mortgage company)