Choosing A Refinance Company That’s Right For You
There are many compelling reasons you might want to refinance your mortgage – to obtain a better interest rate, to shorten the length of the loan term, to switch mortgage types. But to do that, you need to first choose the mortgage refinance lender that’s best for you.
The right lender will help you structure a loan that lets you accomplish your personal financial goals, like saving money each month, pulling cash out based on equity you’ve built up or paying off your mortgage balance faster
Important Factors to Consider When Choosing a Lender
Pricing
Many borrowers focus on which lenders will offer them the lowest rate. But it’s not as easy as comparing one rate to another, because you also need to consider your Annual Percentage Rate (APR), which includes fees and is broader than the interest rate itself. APR is expressed as a percentage and reflects the annual cost of your loan.
Your potential lender(s) should provide you with a Good Faith Estimate (GFE), also known as a Loan Estimate (LE), that will break down this rate, origination fees and terms of your loan. Lender fees may vary, but in general you can expect them to include upfront fees such as closing costs (including third-party fees like the cost of title insurance, closing/attorney and appraisal) and then ongoing fees, such as those related to making late payments or paying your loan off early. If you opt to pay for mortgage points, you can likely lower your rate and monthly payment over the life of refinanced loan.
By comparison shopping and then understanding all of these lender charges, you can make an informed decision relative to pricing. And make sure that any lender fees tied to a refinance do not offset the cost savings you’re hoping to gain.
Mortgage Rates
If you’re interested in refinancing, you already know that it works by trading in your existing mortgage (one that usually has a higher interest rate) for a new one. And now you know that the APR encompasses not just your monthly payment rate itself, but also the fees that go along with it. Keep this in mind as you obtain rate quotes from multiple mortgage lenders. Remember that, in order to get the most accurate picture, you should compare interest rates for the same type of mortgage over the same loan term and on the same day of the quote, because rates change daily based on the market. Read our guide to mortgage interest rates for a comprehensive overview of factors that could affect rates.
Customer service
Even though a refinance can help drive lower rates and better pricing for homeowners, there are other things to consider, such the ease of working with the lender from application to closing and loan servicing. The lender should be responsive to your questions and receptive to resolving any issues. You should also feel comfortable negotiating with them on lender fees, if you’re inclined to do so. Your comfort level will increase if you find a lender who understands your financial goals, is attentive to your needs and has your best interests in mind, whether you’re looking for a cash-out refinance, you’re a veteran or you’re new to the refinance process. Different lenders have different areas of expertise.
Now that you’ve started thinking through pricing, rates and the customer experience, you’re probably asking, “Who should I refinance my mortgage with?”
Below are some tips to get you ready for refinance discussions.
Check your credit.
First things first: do a credit check. By obtaining a copy of your credit report, which you can do for free through one of the three main credit bureaus, you see what potential lenders will see when you apply for a loan. Refinance applications are not unlike traditional mortgage applications; better credit scores usually mean better rates. If your credit score is a bit low, consider holding off on the refi while you pay off some debt or get things in order. If you have good credit, on the other hand, this can be a negotiation tactic. Check out these tips to improve your credit score if you need some practical advice.
Consider a broker
You may be thinking about how to choose a bank to refinance. While banks have loan experts who can help you, there are other options, from mortgage lending firms like AmeriSave to mortgage brokers. Mortgage brokers work with multiple refinance lenders, so by engaging a broker, you’re letting them do the legwork by looking for the best rates and loan options for you. Typically, lenders pay brokers fees to bring them business, but in some cases, you as the borrower may pay their fee, which can drive up your loan costs. You can get lower costs and get faster support when going directly to a mortgage lender. On that note, online applications are more prevalent and safer than ever, so consider the digital application process. Many of the industry-leading mortgage lenders have invested in technology to help borrowers and loan experts streamline the process and make it easier to get to closing.
Do your research
If you’re not working with a broker, you can easily research prospective lenders online. Here again, you’re looking to find refinance lenders with pricing, rates and business models that align with your needs. Research multiple lenders to ensure you can find one that’s right for you. Read online customer reviews and take special note of any consumer complaints that are filed against the lenders you’re considering. After all, it comes down to more than just who has the lowest fees.
Consider your existing lender
If you already have experience with your current mortgage lender, you may think it’s easiest to just go with them. Well, not necessarily. It’s true that they may still have all of your records from the original loan, depending on how long ago it was, but you’re still likely going to have to go through the standard information-gathering process.
It’s possible that your existing lender may be more willing to negotiate with you, especially since you’re a (hopefully valued) current customer and have an existing loan with them. Furthermore, companies are more likely to negotiate when they know they have competition, so don’t forgo the opportunity to talk to multiple lenders – including your existing lender – to find out what interest rate and terms they can offer you.
With lower monthly payments (or even a shorter team), refinancing your mortgage can be a very smart financial decision. Make sure you work with a lender that is going to offer you the best savings and can help you reach your overall financial goals. At AmeriSave, great rates and technology make obtaining a mortgage refinance easy and efficient. We offer in-house processing, underwriting, closing, and funding, so that we can offer our very best rates and minimize delays. Head over to amerisave.com and get your rate locked today!
