Real Estate Finance Alerts

How To Save the Most Money On Your Refinance

Seven steps that will save you money and simplify the refinance process

While it is a great time to refinance, you still need to make the most of your savings. By using these seven steps, you will know exactly when refinancing makes sense for you. You will be ready to act quickly, but will not need to make hasty decisions. The result is an easy, low stress process that will save you time and money compared to a bad refinance or trying to time the rate bottom and missing out completely.

Determine Your Target Rate – Know the rate at which it makes sense to refinance so you do not miss the opportunity. An interest rate any lower is icing on the cake. Simply estimate the number of years you plan to be in your home or have the loan. Then divide the closing costs by the annual savings to calculate the breakeven in years for a given rate. You should refinance if you are likely to be in the home beyond the breakeven date.

Chose A Qualified Lender - The best rate means nothing if you cannot close the loan. Many loan officers are simply sales people without the specific underwriting experience or knowledge required to close your loan. Before you waste time and money as rates go higher, make sure your lender is qualified.

Pre-Underwrite Your Loan – Again, it does not matter how low rates go if you cannot close your loan. New underwriting guidelines make this the most important step of the loan process. While many lenders still try to use the five-minute credit pre-qualification, the reality is much different. You must complete a full application and provide documentation to your lender for a complete review of your credit, income, and assets. Your lender should manually underwrite your loan as well as get a computer approval.

Be Ready – Delays submitting your loan documentation can require costly rate-lock extensions. You must be prepared to submit your loan at all times. Know exactly what documentation will be required for your loan and gather it immediately. Remember to update current copies each month.

Monitor Interest Rates – Take advantage of market volatility to lock your loan. Rates may hit your target rate for only a few hours and go right back up again. When rates are close to your target, contact your lender regularly so you are both waiting to lock.

Lock Your Loan Immediately – Lock as soon as your target rate is available. Do not risk your refinance waiting for rates to go lower. You can always re-lock if they do. You already know refinancing at your target rate makes sense. Waiting for lower rates is the biggest mistake people make when refinancing.

Continue To Check Rates – Keep an eye on rates in case they go lower. Be sure to ask your lender about their re-lock policy because every lender is different. If rates go lower, look to improve your interest rate.