How to Compare Mortgage Refinancing Companies
Comparing mortgage refinancing rates involves using a list of set criteria and standards, but also incorporates an evaluation of your own personal financing goals. Lending companies use a list of standards, so qualifying criteria and a loan denial from one company does not always mean other companies will refuse. However, it may mean you will need to accept a loan with an interest rate or fees higher than you hoped to pay.
- Difficulty:
- Moderately Challenging
Instructions
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Browse the refinance market. Mortgage refinancing rates and services differ according to geographic region. The first step in exploring a new loan involves reading local newspapers or online news services to discover the state of the local mortgage market. Note the banks making loans in the area and advertisements for refinancing specials. Most local newspapers publish a weekly report of local bank offerings at least weekly, while some offer daily charts of refinancing services. The U.S. Federal Reserve Board recommends looking at credit unions, mortgage companies, commercial banks and thrift institutions.
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Chart the amounts the lenders charge for interest rates for various loans. Determine the type of loan, 15-year fixed or adjustable or 30-year fixed or adjustable, that meets your needs. If a short-term, one-to-five year loan with a refinancing option at the end of the period matches your needs, make sure to develop a spreadsheet that compares like refinancing mortgages.
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3
Compare the costs of refinancing, known as loan origination fees, including appraisal costs and any fees for credit reports or other lending assessments. Listings of required fees should be disclosed upfront, before submitting a loan application. Fees should be assessed only once in the application process, but not with loans made with a minimal down payment. These loans may require payment for bank-mandated insurance to cover the risk of the loan. Mortgages made with federal funds may require payment of an insurance policy known as the Up Front Mortgage Insurance Premium (UFMIP).
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Compare the cost of percentage points to make the refinancing loans. Points are a percentage of the loan amount. Banks may mandate payment to reduce the percentage of the mortgage interest or may also allow borrowers to "pay down" a loan to receive a better interest rate. They will pay a percentage of the loan as a one-time, upfront payment.
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Chat with lenders to evaluate lending practices of the refinance companies. Reputable mortgage refinance companies provide print copies of interest rates and loan terms discussed over the phone or at in-person meetings.
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Tips & Warnings
Work with your assigned mortgage representative to explore fine print and details of the refinance paperwork. Report lenders using bait-and-switch tactics to shift your loan to less desirable terms. State attorneys general offices offer procedures for filing reports on refinancing lenders who promise low interest rates and terms and later stipulate increases once you have made a commitment to the loan and lender.
