Considering A Different Type Of Refinance Mortgage

So you want a mortgage refinance. Start by investigating the various types of mortgage loans. Follow these tips for a snag-free experience:

Know When to Refinance Mortgage

• If you have an adjustable rate mortgage with high or no limits on interest rate increases. Switch to a fixed-rate mortgage or to an adjustable that limits changes in the rate at each adjustment date and over the life of the loan.
• If you want to save over the long haul. With a 15-year, fixed-rate mortgage refinance, your payments are somewhat higher than a longer-term loan, but you pay substantially less interest over the life of the loan and build equity more quickly.

Lock In That Rate
If you decide to apply for refinancing with a particular lender, and don't want to let the interest rate "float" until closing, get a written statement guaranteeing the interest rate and the number of discount points you'll pay at closing. This binding commitment or "lock-in" ensures that the lender will not raise these costs even if rates increase before you settle on the new loan. You also may consider requesting an agreement where the interest rate can decrease, but not increase, before closing. If you cannot get the lender to put this information in writing, find one who will.

• Most lenders place a limit on the length of time (say, 60 days) they will guarantee the interest rate
• You must sign the loan during that time or lose the benefit of that rate
• Contact your loan officer periodically to check on the progress of your loan approval and see that the process remains on track

Find the Best Deal
Shopping around for your refinance mortgage by calling several lending institutions to ask each one what interest and fees they charge. You will typically find variations. Also ask about their "annual percentage rate" (APR) and compare them. The APR tells you the total credit costs of the refinancing, including interest, points, and other charges.

Remember, you do not have to refinance your mortgage with the same lender that provided your original mortgage. However, to keep your business, some lenders will offer their original mortgage customers the incentive of lower mortgage interest rates, sometimes with reduced closing costs.

What Disclosure Must the Lender Give You?
For a refinancing, the lender must give you a written statement of the costs and terms of the financing before you become legally obligated for the loan, as required by the Truth in Lending Act. You usually receive the information around the time of settlement, although some lenders provide it earlier. You will want to review this statement carefully before you sign the loan. The disclosure tells you:

• The APR
• Finance charge
• Amount financed
• Payment schedule and other important credit terms
• You have the right to rescind or cancel the transaction within three business days following settlement, receipt of your Truth in Lending disclosures, or receipt of your cancellation notice, whichever occurs last

Will the Lender Refund Your Application Fees if You Do Not Sign the Mortgage? When you apply for a mortgage, some lenders require you to pay a special charge to cover the costs of processing your application. The amount of this fee varies, but it may be $100 to $200. Usually, you must pay this charge at the time you file the application.

Some lenders do not refund this application fee if you are not approved for the loan or decide not to take it. So, before you apply for a mortgage, ask lenders whether they charge an application fee. If they do, find out how much it is and under what circumstances and to what extent it is refundable. However, if you elect to cancel the transaction within three business days after you close the loan, as discussed above, you are entitled to a refund of all costs and charges imposed for the credit transaction.