How to Refinance

How to Refinance: Comparing Quotes

by Gabriel Traverso
Mortgage Directory Columnist

One of the most important things you need to do when applying for a mortgage refinance is to make sure to shop around. Get more than one offer and compare them.

Monthly payments, interest rates, and points can all be very confusing. Today there are a number of mortgage loan products that look like a great idea if you're only comparing monthly payments, but could be a bad idea if you compare the interest rates. Some offer low interest rates but high points and fees. It doesn't take a financial whiz to know how to refinance, but here are few key things to keep in mind.

Refinancing Quotes -- Apples to Apples?

There are three major points you want to compare when shopping for a mortgage loan:

• Rates: When you compare interest rates between two loans, compare the annual percentage rate (APR), which rolls up the interest rate for the loan plus points, fees, and other charges you might be required to pay. Simply comparing interest rates doesn't give you a complete picture.
• Points: Compare points for each lender you're considering. Some lenders tie points to the interest rate--higher points, lower interest rate or lower points, higher rate.
• Fees: Fees, also know as closing costs, are charges for the refinance transaction, and can range from 2% and 3% of the loan. You may be able to finance the closing costs, but this adds to the overall cost of your home loan.

Top Refinance Rule: Ask Questions

When you are comparing mortgage loans, you have the right to ask questions. Don't hesitate to have everything spelled out for you -- more than once if necessary. In order to make an accurate comparison you have to arm yourself with information. Don't apply for a loan until any lingering doubts and all of your questions have been answered.

Source
Federal Trade Commission: Looking for the Best Mortgage

About the Author
Gabriel Traverso is a freelance writer, independent musician, and artist. He resides in Reno, NV.