House Refinance Center
Refinancing - Get The Right Mortgage Options
How to select the right lender

Getting the right lender to work with you and guide you through the refinancing
process is crucial to obtaining the best rate. There are several banks, local and
online, as well as credit unions hungry for your business.

Start looking at the local newspapers. Check the lowest rates of lenders and make a
short list.

Talk to friends and relatives who have refinanced in the past five years. Ask them
about the experience they had with their lender. Specifically, find out about the fees
at settlement. Many lenders promise the moon but deliver nothing. Find out from your
friends if their lender went above and beyond in order to make the closing as smooth
as possible.

Next, you should have a talk with a realtor. Many realtors keep a short list of their top
lenders. Ask them to refer a good lender to help you refinance your house. There is
no financial benefit to the realtor, since it is unlawful to accept a commission for a
referral.

Cross reference your lists. See if there are any lenders appearing on all the three
lists, your personal list, your friends and family list and the realtor's. These are the
lenders you want to focus on first. Make an appointment and see all of these lenders.

Here is what you should look for in the right lender.

  • Patience. You need someone who will explain the mortgage terms and
    conditions to you so that you understand them fully. If you need to have
    something repeated, it shouldn't be an issue for the lender.

  • Rates. You obviously want to work with a lender that would give you their very
    best rate when you first ask for it. Some lenders will quote you a rate and when
    you show them that "ABC Bank" is offering something better, they would
    immediately drop their rate and match ABC's. Beware of lenders that shift too
    easily. They are not trustworthy.

  • Availability. Your lender should be available to answer your questions when
    you call, and return your calls in a reasonable time period. Be reasonable. You
    should limit your calls to between 8 am and 10 pm, Monday to Saturday.
    Sunday is a day of rest, and a time for family. Respect this. So unless the
    lender says it is okay to call on Sunday, write down your questions and call on
    Monday. Be cautious with lenders that have assistants. They usually pass you
    off to an assistant and you never get to talk to them after the first interview.
    Operations like this have a "front man" whose job is to bring in new business.

  • Customer service. You want a continuing relationship with your lender. It
    doesn't matter how carefully you plan your refinancing, there are sure to be
    bumps along the way. Competent customer service should make everything
    right. Long after the deal is closed, the right lender will be there to help you in
    difficult times. The practice in the mortgage industry is that after a mortgage
    loan is closed, a different company steps in and services the loan. You can
    deal with the servicing company directly or you can ask your lender to
    represent you, and act as a "go between". To do this you need to give the
    servicing company a letter authorizing them to discuss details of your mortgage
    with the lender.

When you are refinancing, you have the option of remaining with your existing lender
or shopping around for a better deal. Remember, you are not tied to your lender.
Sometimes, your lender will try to make you feel guilty and obligated. Just ignore him.
It's business. This is exactly what he would say to you if you are facing foreclosure,
and he is the one delivering the bad news.
How to get the options you need
written into your mortgage

The options that we put in the mortgage contract
determine if we have a good deal or a great deal.
Everything is negotiable. So prepare a list of what you
would like in your mortgage. Some of the features we
suggest are:

Prepayment option

The prepayment clause in your mortgage can help you
pay off your loan sooner, or it can cause you to pay a
huge penalty when you sell the house before he term
ends.

The prepayment that is good for you allows you to make
extra payments that go directly to your principal balance.
Be sure to write "apply to principal" on the memo line of
your check. This is your proof that you were paying down
the principal. This payment could be one that you make
once a month, or one that you make as a lump sum once
a year. The optimum situation would be to combine the
monthly payment with the annual payment.


Biweekly payments

Making bi-weekly payments to your mortgage has the
effect of making one extra monthly payment. You actually
make 26 payments during the year. For example, if your
monthly payment is $1,000 and you make monthly
payments the total is $12,000 per year. With bi-weekly
payments you pay $500 every two weeks for a total of
$13,000. As you can see, you have made an extra
payment of $1,000. With a plan like this you would hardly
notice that you have paid an additional $1,000.

Bi-weekly is not to be confused with bi-monthly. With
bi-monthly payments, you pay twice a month. Therefore
you make 24 payments. There is no benefit in terms of
paying off your mortgage sooner. Some homeowners
use this feature because it lines up well with their pay
dates.


Portability

Porting a mortgage means that you take it with you to
your next property. If you were to buy a different house
and the old mortgage was so great that you didn't want
to give it up, then you can have the lender transfer this
mortgage to the new house.

Porting a mortgage is common now that rates are low. If
the outstanding balance is not enough to satisfy the
mortgage on the new house, you will have to borrow
some extra funds. The extra money will be at the current
mortgage rate. By combining the two rates, you end up
with a blended rate.

Generally there is no charge for the port. However, the
lender will try and assess a fee for the discharge of the
old mortgage. Because this could be a substantial fee, it
is advisable to have these charges addressed and
agreed upon, and written into the contract.


Early renewal

When rates are on the rise, an early renewal option is a
benefit to the borrower. If the borrower is near the end of
the term, and the rates are rising, he can renew early to
take advantage of a better rate.

These options and clauses have to be discussed when
the mortgage is approved. When you go into the office to
sign the documents start negotiating. The whole contract
does not have to be retyped. An amendment page can
be added to the contract. Usually the contract are
computerized so it is a simple task.

Prepayment penalty

If you pay off your mortgage before the term the lender
will charge a penalty. Why does the lender care if you
pay off the mortgage? Remember the lender sells
mortgages a few months after the closing. The buyer of
these mortgages in the secondary market expects a
certain yield. In other words he expects a profit of "x"
dollars, or "y" percent. When you pay off the mortgage,
he doesn't get his full profit. So thus the penalty.

The penalty can be negotiated. But whatever is decided,
get it in writing.


N.B. To see more on biweekly payments see our chart. CLICK
HERE.
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