What Is The Best Home Loan Refinancing?
- Spend some time forecasting out the next three to 10 years of your life. Think about what changes might have been in your life and how your housing needs may change. If you are young and single and only own a one bedroom condo, decide if it is likely you will meet someone and start a family in the next five years. Your current home may be the place you spend the rest of your life. Mortgage solutions for both of these situations vary greatly. Someone who knows she will not own the home in five years may not want to pay a higher interest rate for the security of a 30-year fixed rate loan. Someone who is retired may wish to pay off the home more quickly and choose a 15-year fixed mortgage.
- Lenders provide many different types of mortgage loans. The three most common are fixed-rate mortgages, Adjustable Rate Mortgages (ARMs) and balloon mortgages. Fixed rate mortgages provide homeowners with the security of knowing their interest rate will not change over the term of the loan. Since the interest rate does not change, the principal and interest payment does not change, either. Fixed-rate mortgages require a higher interest rate than do other loan types because of the payment security they provide. ARMs come in two different varieties, the traditional ARM and the hybrid ARM. Traditional ARMs adjusted annually either up or down depending upon the current market conditions compared to the previous year. Hybrid ARMs offer a fixed-rate period, usually between three and 10 years, before adjusting annually like a traditional ARM. Typically, hybrid and traditional ARMs provide interest rates significantly lower than fixed-rate mortgages, at least early on. Balloon mortgages provide lower interest rates than fixed-rate mortgages and tend to act like fixed-rate mortgages except they require an early payoff after five or seven years.
- Call several different lenders in your area and ask for a quote for the mortgage type you chose. Most communities offer dozens of different types of mortgage lenders and banks who provided mortgage quotes. It's essentially you talk to several mortgage lenders when obtaining quotes.
- Compare the multiple mortgage quotes and compare them to each other using either a spreadsheet or page three of the Good Faith Estimate (GFE). Call back the top three or four lenders and negotiate interest rates and closing costs on the mortgages. Some of the closing costs may not be negotiable. Use the different quotes you have on rates as leverage as they compete for your business.
