By Justin Hunter
Applying for a mortgage is usually stressful and time consuming, and
you wish someone could just do it for you. “Here’s all my
information, now make it happen” you say to yourself. But you
have to be involved with the mortgage
process because it is something you will pay 12 times a year for
up to 30 years.
The mortgage industry
is always changing. Different rates and products may cause you to want
a different mortgage from the one you are currently paying. So you decide
to refinance.
Besides the obvious annoyance of having to go through the process of
finding the appropriate mortgage product and rates you are comfortable
with, you will be saddled with unfriendly fees when you decide to refinance.
The article, “Mortgage Refinancing - Tips to Reduce Your Costs
and Fees,” posted on ezinearticles.com and written by Louie Latour
provides helpful ways to reduce the assorted fees you will be subjected
to pay upon refinancing.
The primary nuance of refinancing is the fees you must pay because many
current mortgage holders believe the fees are waived because they already
have originated a loan and have demonstrated being a worthy borrower.
But the fees are not all associated with the actual costs of originating
a loan.
“These fees include origination fees, points, title search, survey,
and closing costs.”
Many homeowners that refinance get caught paying high fees because they
are lured in by a low interest rate. But this may not be the best way
to refinance your mortgage.
“You can reduce your mortgage refinancing expenses by choosing
the right loan structure, avoiding costly Private Mortgage Insurance,
and negotiation for lower fees and closing costs.”
First you need to clean up your credit
report. Errors are very common on credit reports and most of these
errors go undetected. You need to obtain a copy of your credit report
(you can receive one free per year) and make any necessary corrections
to erroneous reports. This may take a while for the corrections to take
place but it can drastically reduce your interest rate on your refinance.
One way you can potentially save thousands of dollars is by avoiding
private mortgage insurance.
“Many homeowners cash out equity in their home when refinancing.
If you cash out too much equity, most lenders do not want you to borrow
more than 80%; the lender could require Private Mortgage Insurance.
Private Mortgage Insurance is expensive, it could add hundreds of dollars
to your payment amount, and does nothing to protect the homeowner. This
insurance only protects the lender against certain losses in the event
of foreclosure. Avoiding the temptation to cash out equity in your home
will protect you from Private Mortgage Insurance.”
You may also pay points to lower your interest rate. This is beneficial
especially if you plan on living at your current residence for more
than seven years. One point could save you .25 percent on your monthly
payment for the life of the loan. One point is equivalent to one percent
of the entire loan amount and is payable when you close on the refinancing
mortgage. Even though you will pay more when you initially refinance,
you will save thousands of dollars over the course of the mortgage.
Another useful and practical w ay to lower refinancing fees is through
negotiation.
“Negotiating works best if you have excellent credit. Your credit
is a useful bargaining chip for negotiating in exchange for your business.”
Refinancing is going to save you money in the long run regardless of
the fees you pay. But these are just ways to help the refinancing process
be even less stressful.