Home Mortgage Refinance Tips: Do a Comparison Before Refinancing your rate

I want to share with you some mortgage refinance tips that will help you save big! If you want to read a real world example of someone who just saved a bundle on their refinance, you can read my story here.

There are two main things you should look at when refinancing your home mortgage.

• The Interest Rate
• The Closing Costs

Let's start with the interest rate. It's fairly easy to comparison shop the interest rate for your new loan. There are some great free tools like Zillow's mortgage rate comparison tool, and Google's mortgage rate comparison tool that make comparing mortgage rates incredibly easy.

These are great because you don't have to enter any personal info. It's fast and easy to get a good idea on a mortgage rate to target. It may take 4-5 minutes to get a fairly accurate picture of the interest rates available for your situation.The only thing you will need is an good idea of your current credit score.

You might call one of the mortgage brokers you found from zillow or google, or use the rates you were quoted as a starting place when talking with a local lender. This is preferable to simply making an appointment with your bank and asking them for a quote. People that do that probably have no idea what a competitive interest rate is, and there is a good chance they will fall victim to some brutal 'yield spread premium*'. (*explained later)

Closing Costs: Pitfalls to avoid...

Now lets take a look at closing costs. Refinancing can be expensive. Some people do not care about closing costs because they do have to pay them out of pocket. Closing costs are simply rolled into the new loan. If you don't pay close attention to these fees, then this is a great way to lose money!

Closing costs can be broken down into three main categories.

1. Lender Fees
2. Attorney/Title Fees
3. Prepaids (Tax and Insurance reserves for escrow)

Prepaids are basically a wash. Your current escrow balance will most likely cover this. The two other categories, lender and attorney fees, are where you can save some money by arming yourself with a little knowledge and comparison shopping.

Tips for lowering your Lender Fees

Lender fees are usually made up of the following:

1. Origination fees,
2. Points,
3. Processing Fees,
4. Underwriting Fees.

These are all negotiable. Most people just accept whatever fees are thrown their way. Don't be one of those people! Before I get hate mail from mortgage brokers, remember, they are not volunteers. They provide an important service and deserve to be paid. But how much they are paid is up for negotiation.

It makes sense to shop three or four mortgage brokers and compare their fees before proceeding with your loan. Just be upfront and let each person know that you are shopping around. Each broker should be able to give you an initial fees worksheet or a good faith estimate with out too much trouble. This worksheet spells out the fees that you can expect will show up on your final Hud closing statement.

In another article, I will go into detail about how to negotiate with your lender. We will learn things like yield spread premium and the par interest rate. Throwing these words around in a knowledgeable fashion are a great way to get the best rate and terms when talking with your mortgage broker.

Tips for lowering Attorney and Title Fees

The last bulk of your cosing costs are going to be paid to your attorney and the title insurance company. Most people just use the attorney that the lender recommends. This may not be a bad thing, but you should at least ask how much they will charge to close your loan. But, you are not like most people. You are smart. You are reading this hub :) We know you are going to do the smart thing and call a couple of attorneys and ask how much they charge to close a refinance.

Also, don't overlook using the attorney that closed your original loan. Often times they reduce their fee for repeat business. They can also reissue your title with less work, and thus save you money.

The other main expenses is title insurance. The best way to save money on that is to make sure you are getting a reissue of your title insurance. After all, you paid big bucks for it the first time around when you bought your house. Most attorneys will do this without asking, but it always is a good idea to ask and make sure your are getting a reissue of your title insurance rather than a brand new title policy.

Good luck!

I hope you found these mortgage refinance tips helpful. What did I miss? How were you able to save money on your mortgage refinance? What was your interest rate? Also, please feel free to share your tips for refinancing your home mortgage.