Ways to Save Money on Your Mortgage Refinance
Refinancing your home loan is an excellent tool to help you save money. If done correctly, your mortgage refinance can save you thousands of dollars. However, there are several costs that are associated with refinancing your home. These costs can add up to a few thousand dollars at the time of closing.
Ways to Save Money on Your Mortgage Refinance
Compare lenders.
Compare lenders before choosing who to refinance your home with. Differentiate the closing costs, turn around time, level of service and of course the interest rate when deciding which lender you want to work with.
Look at your APR, not just the interest rate.
It is important to understand the annual percentage rate (APR) on your new mortgage. An interest rate can be deceiving, especially if there are a lot of fees associated with getting that rate and the mortgage in general. When deciding what lender to use compare the annual percentage rate to assure you are getting the best deal.
Refinance to a shorter term.
The amount of interest you pay on a shorter term mortgage is significantly lower. By refinancing to a shorter term you will benefit from a lower rate and will pay the loan in full in a shorter period of time. Speak with your lender about what terms are available for your home refinance.
Avoid a cash out refinance.
Many homeowners decide to utilize the equity in their home by taking out cash while doing their refinance. A cash out refinance is a more costly option with higher interest rates than other refinance loans. Interest rates increase as the loan to value ratio increases. Keep these factors in mind during your next refinance and you can save thousands.
Pay for closing costs out of pocket.
Most lenders will allow you to roll your closing costs into the loan of your refinance. However, if you want to save the most money possible, it is advisable to pay out of pocket for all of the settlement fees. While this will have an impact on your cash savings in the short term it will yield a great amount of savings in the long term. If you add your closing costs into the loan you are now paying interest on those closing costs for the next 15-30 years. This will reduce the overall savings of your mortgage refinance.
Close toward the end of the month.
This last tip won’t save you thousands, but it can make a difference at settlement time. When you close on a loan you pay any interest through the end of the month. A per diem rate is calculated to determine how much you’ll have to pay at closing. If you close toward the end of the month this will decrease the amount of pre-paid interest you’ll pay at the settlement table.
The overall goal of a mortgage refinance is to save money both short term and long term. The tips listed above will allow you to stretch your money even further and get the maximum financial benefit from your mortgage refinance. Use the tips that best suit you in order to save money on your mortgage refinance.
