It’s a common tip that you can find in every refinancearticle. Finding plausible options and comparing them is a necessary practical step before forwarding your loan application. But how do you exactly do a comparison?
This article focuses on this common question, giving you a checklist of things you need to look into so you can properly evaluate which offer best serves your refi intent.
The most obvious consideration is the mortgage interest rate. Ask around for quotes from various lenders. Do this with organized planning. If you know your preferred term (i.e. 15-year or 30-year fixed rate mortgage or an ARM), it should be easier for you. Ask the lenders the same questions and use the input for later comparison.
Remember that it’s not just about the interest rate but also the other lender fees and charges that are put into the loan. Ask for all financial information associated with the loan program.
If you are considering an ARM which have lower initial interest rates, also factor in the potential increases in the future. Learn when the loans reset, what rate the ARM is indexed to, and how high the rate can potentially rise.
For more articulate comparison, use the APRor Annual Percentage Rate which combines the cost of mortgage, fees, and interest rate.
Locking on your rate protects you from rate hikes that may happen during the interim to closing. How much rate locking costs as well as the lender’s lock-in period can help you in choosing the right lender to do business with.
How much is the minimum and maximum amount that you can borrow from the lender? Of course, you need to determine first how much you need, else, it would be harder to gauge which one you should select.
Do not borrow more than you should but make sure it is enough to cover all the costs of your intended purpose.
What documents are asked? What income qualifications are required? How are you expected to pay, and how are the insurance, taxes and other costs structured? What are their conditions regarding closing?
Is there a fee that the lender will charge you should you pay off your debt sooner? Most reputable lenders do not place prepayment penalties on borrowers but those who do are not unheard of.
How are your lenders in terms of service? Are they willing to talk to you about your needs or simply deal with you like any other client? Your local, smaller lenders are usually more personalized in their service compared to big banks. Customer service is an aspect often bypassed by many borrowers, but having someone who works with you personally gives you the assurance that you are in good hands.