If you’re thinking of refinancing your mortgage, but wondering what’s involved and how to negotiate the best deal as painlessly as possible, here’s what you need to know. Good news: The process is probably simpler than you think.
- Research online for rates in your area. Bankrate is very easy to use. This helps you know what a “good” rate is.
- Next, you can either contact the bank directly to start the refinance process or, if you prefer, you can call a mortgage broker.
There are pros and cons to each:
- Refinancing through your bank. A bank, for example, might work with you on the rate if you have other accounts there. However, banks tend to be conservative so if you fall outside their lending standards, they might refuse your loan.
- Refinancing through a mortgage broker. Brokers have access to wholesale mortgage rates, which are typically lower than your neighborhood bank and sometimes will make more aggressive lending decisions. But, be sure you get a broker you trust by asking friends and family for referral.
And either way, check their work. Both banks and brokers make mistakes on their contracts.
3. The real hit on costs with refinancing are in the closing costs. This is where it benefits you to get more than one estimate – and be sure it includes the whole package: interest rates plus closing costs. Certain aspects of closing costs are negotiable – origination fees, title insurance, homeowner’s insurance, etc. These are things you shop around for or ask to be reduced. Others are pretty set in stone – appraisals and credit report fees, for example. Compare carefully and ask questions if something seems vague. Odds are, if its vague, its “padding.”
4. Once you compare the fees, select the bank/broker you’re most comfortable working with and ask for the discount the ‘other guy’ is offering in order to get the best deal. If it’s important to you to know who your banker is (i.e. you want to be able to talk to the bank/have a relationship with your banker), you’ll want to ask if the bank intends to continue “servicing” your loan. It’s not uncommon for a bank to turn over servicing to an agent down the line.