3 Important Refinance Questions
(Glen Allen, Virginia USA)
Ask Kate: 3 Important Refinance Questions Kate, Despite the tough economy, there are plenty of opportunities available for those looking to refinance their mortgage. But there are also lots of charlatans who masquerade as benevolent lenders.
So before you sign on the dotted line, make sure you do your homework and understand what you’re committing to. A little bit of upfront homework can save you years of headaches down the road.
First of all, find a reputable lender who has an established history and can provide references. Although you can apply for loans on the Internet and be approved within minutes, it’s to your advantage to work with a mortgage lender based in your home town.
Call around, ask friends for referrals and see whom some of the local Realtors work with. Then meet with your prospective lender and come prepared with your top three questions:
Refinance And Interest Rate
1. What is the interest rate that you’re offering for the loan and what is the annual percentage rate? The annual percentage rate (APR) includes the cost of securing the loan and any fees that are attached to the loan. If the difference between the interest rate and the APR seems significant, it means you’re being charged too much.
Refinance And Type of Mortgage
2. Is this a fixed loan or is it adjustable? If you currently have an adjustable rate mortgage, one of the reasons to refinance is to go into a fixed rate loan where the payments are fixed over the life of the loan.
Make sure you understand the type of loan you are applying and being approved for. Adjustable loans start off being more affordable, but typically will escalate over time, making payments to difficult to manage.
Refinance And Closing Costs
3. What other costs am I responsible for? Depending on your locality, there are a variety of services and fees which are required and rolled into a refinance.
Typically your house will need to be appraised so the lender is assured it is worth the amount of money they are lending you. There may also be other fees associated with closing your loan, including attorney fees, recording fee, title insurance, state or county-specific taxes and a myriad of other charges that may make no sense to the average homeowner
You should also ask if there is a prepayment penalty, meaning that if you decide to pay off your loan early, will there be any special charges assessed. It is illegal to charge a prepayment penalty in some states, but you should make sure you understand the laws where you live.
Refinancing your mortgage can save thousands of dollars over the life of a loan, so a little hard work up front can reap rewards later on. Just be sure you ask the right questions and be satisfied with the answers.
Kate Answers: 3 Important Refinance Questions
Hi SuzyQ, Thanks for contributing three crucial questions to ask a lender. I hope you'll come back to my website Get Your Best Mortgage Rate again in the future.
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