Q&A: Should I use my bank when I refinance?
BETHPAGE, N.Y. - AUGUST 26, 2010: At Bethpage Federal Credit Union Headquarters, Mortgage Loan Officer Jerry Meigel meets with Marti Real of Bayville concerning refinacing her home mortgage. For story about low mortgage rates. Photo by Kathy Kmonicek Credit: Kathy Kmonicek/Kathy Kmonicek
Q: I'm thinking of refinancing my home. The current rate on my 30-year, $229,000 loan is 5.75 percent. To get the best interest rate on my refinance, do you recommend I directly contact a bank with which I already have a relationship? Or should I go with a mortgage broker I don't know.
A: One of the biggest mistakes homeowners often make when refinancing a mortgage is not shopping around. While it seems as if all loans should cost the same, since Fannie Mae, Freddie Mac and FHA purchase more than 90 percent of all loans on the secondary market, in fact, each lender has its own set of rules, regulations, programs, costs and fees.
You will find great variety in loan programs and costs, so shop around and don't limit yourself. You should speak to four or five different types of lenders, including big national lenders (the so-called "big box" lenders), a mortgage broker (ask your real estate agent for a few referrals), a credit union (if you belong to one or can join one), a local lender that holds mortgages in its own investment portfolio (and has more flexibility with program rules) and an online lender.
By all means, start your shopping by chatting with your current lender. If your current lender has a loan program that will save you money, or if the lender is willing to modify your loan for a few hundred dollars, that would be great for you.
However, your current lender may only be servicing your loan, which is actually held by another institution. In that case, your process of applying and obtaining a new loan from your lender will be as if you are starting from square one.
If you check around, you may find that the rates are similar for a loan that you want, but please watch the fine print and the fees associated with the loan. Standard fees may appear to be the same from bank to bank, but some lenders levy non-standard fees that can be quite high. Be careful and ask lots of questions.
Plan to spend some time shopping around for your new loan. It's the only way I know of to get the best mortgage deal.
Ilyce R. Glink's latest book is "Buy, Close, Move In!" Distributed by Tribune Media Services, Inc.
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