Refinancing a mortgage offers several benefits, from lower interest rates to shorter repayment periods. A vital point to consider when opting for refinancing is to make a detailed comparison of rates and quotes. Here’s our list of tips to compare refinance rates.
Shop Around
Mortgage refinance rates vary between lenders, and your best bet is to consider quotes from different insurance companies. Comparing refinancing rates on offer can help you shave substantial amounts in interest payments over the loan term.
Compare the Terms
After selecting two or three potential lenders, it’s time to compare what’s on offer. When you apply for a loan, the lending company provides you with a loan estimate, which gives you insight into approximations of the refinancing’s monthly payments, interest rates, and fees. The estimate report contains essential details that include,
Interest rate: This contains information about the interest component comprising type, rate changes, adjustments, and how it affects the loan’s overall cost.
Penalties and hidden costs: Other costs like penalties for prepayments and massive lump sum payments at the end of the loan tenure can lead to shaky finances. Read all the fine print of the contract and stay away from risky clauses.
Points: Some insurers offer you an option to reduce your interest rate through discount points in exchange for payment. Each point holds 1% of the loan value.
Fees: While comparing refinance rates, checking for closing costs and hidden fees can help you plan for all payments. These expenses typically comprise loan origination fees, appraisal, inspection, credit reports, mortgage insurance, legal fees, and taxes.
Cash to close: This gives you a rough idea about how much you will have to pay and includes down payments and closing costs.
Do Your Homework
Several websites offer tools that help you form a side-by-side comparison of your shortlisted loans. These tools could help you make a better decision based on loan features and customer experiences. Also, weigh the benefits of dealing with a traditional brick-and-mortar lender and one that’s purely online.
Seek the advice of your financial advisor before finalizing the contract. Spending time comparing mortgage refinance rates can help you streamline your payments and help you improve your finances.
