Louie Latour asked: As a homeowner looking to refinance your current mortgage or cash out equity in your home, one of your primary goals should be to avoid paying excessive fees. Mortgage lenders fees can rob you of any benefit you might seek from refinancing or cashing out equity. Here is what you need to know to get started.
Mortgage lenders love charging fees. If you are not careful, these fees can easily add up to thousands of dollars in charges you have no need to pay. Mortgage lenders and brokers are inherently greedy; because of this you need to shop around for the best deal on your new mortgage.
Add Up All Fees and Closing Costs
Make sure your lender gives you a good faith estimate that includes all fees. The Annual Percentage Rate found on this estimate factors in the interest rate, closing costs and any other fees you will required to pay. This Annual Percentage Rate is a useful figure to compare when shopping fro a mortgage. Make sure there are prepayment penalties for early repayment or other hidden fees buried in the fine print.
Lender fees are always subject to negotiation. The mortgage industry is fiercely competitive; as a homeowner you are truly in the driver’s seat when it comes to demanding better service from your mortgage lender.
Watch out for Lender Gimmicks
When you are shopping for a mortgage lender beware loan offers with unusually low interest rates. These “discount rates” are only valid for the introductory period. At the end of this introductory period the lender will reset your payment to the actual interest rate; these loans often carry much higher interest rates than normal mortgage loans. Gimmicky loans often come with heavy prepayment penalties, balloon payments, and other terms indicative of predatory lending practices.
Shopping from a variety of lenders and brokers will allow you to choose terms that are more favorable. You will be able to compare fees and avoid predatory lenders.
If you are refinancing your mortgage to get money back from your equity you should also consider home equity loans and 2nd mortgages when shopping for the best deal. Sometimes these other loan options may carry better interest rates and lower fees if you can find a good deal. Home equity loans can be repaid quickly which will save you money in the long run. To learn more about saving money and avoiding common mortgage mistakes, sign up for a free mortgage guidebook.
Marie
