| House Refinance Center |
| How To Get The Right Mortgage Options |
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| 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.
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. |
| Get The Right Features 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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