Despite the numerous mortgage lenders out there, finding favorable refinance rates still requires some effort. Thanks to the internet however, one doesn’t have to go into too much trouble to get an affordable refinance deal. There are a few helpful tips on finding a rate that suits one’s finances.
Shopping Around
One needs to look around in order to dig up the best rates. While at it, it would be worthwhile checking out national and regional lenders in addition to local outlets. Nowadays, a lender doesn’t need to operate within the locality of a potential borrower.
The internet would be of great help here. It’s possible to make inquiries and applications over the web then having the documents delivered via mail. The loan can then be closed at the office of a local licensed agent or attorney.
Having said this, small local lenders shouldn’t be overlooked either, especially if one finds it difficult to qualify for a refinance with big banks. Such lenders could offer more flexible terms and usually have a better understanding of the local real estate market. This acquaints them well with the underlying risks. Local lenders are also more likely to accommodate people whose property is unique or those with an irregular income.
Looking Beyond Rates
A common mistake among people pursuing refinancing is maintaining sole focus on rates. These are usually part of a bigger picture. Other things to take into account include closing costs, which could effectively boost the mortgage rate by about 0.5%.
Closing costs typically range between 2-6% of the loan principal. This however depends on the lender, options chosen and where one lives. It’s usually hard to compare closing costs due to different structuring across lenders. The fees charged could be different and the amounts may also vary. Fees could also carry different names across lenders.
Simply put, a loan that initially appears favorable due to low rates could end up costing more than another one whose rate is higher due to hidden high fees. It’s therefore important to take the total charges into account when calculating the total loan cost. Something that could be of assistance here is the annual percentage rate (APR). This is a way of expressing total loan cost as an interest rate. A lower APR indicates less overall costs.
When shopping around, one needs to make up a chart to help them compare offers from different lenders including all costs. Discount points should also be looked at, which are special closing costs which allows the borrower buy down the interest rate by paying a larger amount upfront. These are good for those who expect to have the loan for longer.
Rate Management
Interest rates fluctuate with time, depending factors like financial activity both nationally and globally as well as government policies. When refinancing a mortgage, one should keep in mind that it’s very hard to predict rate activity over a time period. The general rule is, things that are perceived to be good for the economy result in steeper rates, while global crises or bad economic news do the opposite. This happens as investors resort to other safer havens for their funds.
It would thus make sense acting promptly if one feels they can benefit from refinancing at the prevailing rates. Waiting for them to drop down to some set target wouldn’t make sense. Doing a little digging over the internet and crunching some numbers in the process should be helpful in finding favorable refinance rates.
