Careful consideration of competing loan offers can save a
typical homeowner a lot of money. This is an observation of many loan officers
who note that overlooking high lender loan origination fees in favor of a low interest rate can lead to
significant overpayment on a mortgage refinancing. Only by taking your time and
asking the right questions can you help avoid paying too much for your
refinancing. Never jump on the first mortgage that you qualify for as this is a
recipe for disaster.
The cost of a loan is consists of many factors and only by
comparing all of these factors can you obtain the best value for your money.
One such factor involves the fees that lenders charge for various services.
Lenders are required to provide a document called the Good Faith Estimate of
fees when you submit your application. However, in many cases they don’t do
this. It is your right to ask for this documentation and it is imperative that
you do so.
One mistake many people make in the refinance process is to
only look at the Annual Percentage Rate (called the “APR”). The APR does not
contain all the fees associated with writing the terms of the loan. Again, this
info is found on the Good Faith Estimate. Another problematic area relates to
how the loan is structured. Oftentimes the loan with the lowest interest rate
can contain things such as balloon payments which make them unfavorable when
compared side by side with other loans.
One of the biggest fees associated with any refinance relates
to paying points. A point is typically one percent of the financed amount and
is nothing more than prepaid interest that equals pure profit to the loan
provider. Though often these points are not completely avoidable, if included
in the amount financed, they can significantly increase the overall expense
associated with the refinance. Whenever possible, associated lender loan origination fees related to
points should be paid up front. This will save you money in the long run.
So, when shopping for competitive refinancing mortgages, make
sure you take into account favorable terms and the associated mortgage lender fees. Many times
mortgages with the lowest advertised interest rate are not the most cost
effective for you. Make sure you do your homework ahead of time and utilize a
reputable mortgage lender and your refinancing can help start you on your way to
a better financial future.
