- Consult as many lenders as possible when you are looking for a refinance. The lender you are using for your first home loan already has your business: it is possible that they may not be as welling to give you an ideal refinance package as another lender that wants to pick you up as a customer. The more lenders you receive information from, the more you will learn about current mortgage rates and what you can expect for your loan application.
Pay Attention to the Market
- The market plays the main role in deciding what type of refinance you can get. If the housing market has increased in your area since you got your first mortgage, then rates may have risen to make lenders more profit, making it difficult to find a better mortgage. On the other hand, if the housing market in your area is still in a slump, rates may have fallen to attract customers in a declining market, and you may be able to get a deal on your refinance that will save money if you replace your old mortgage with it.
Pay Attention to Loan Terms
- Loan terms control your precise interest rate and the length of the loan. Always aim for a fixed rate, since variable interest rates go up over time and make monthly payments more difficult to make. When you look at loan length, see if you can manage the higher payments that come with a shorter 20-year or 15-year loan. If you can reduce your loan length, you will reduce the amount of overall interest you have to pay and make the loan a better deal than your old mortgage.
Calculate Loan Fees
- Loan fees are one of the downsides of refinancing. Most of the loan fees you had to pay for your first mortgage, including application and registration fees, also apply to refinance, coming to thousands of dollars you have to pay out of pocket. If the differences between your old and new home loans are slight, these fees may make a refinance more expensive than it is worthwhile. This may be one case where staying with your old lender is a good option, if they are willing to give you discounts on the loan fees.