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How to find the best refinancing deals
Low interest rates aren't always worth it if you have to pay high closing costs.
Refinancing your home can save you a lot of money — but it can also cost you if you pick the wrong lender. Take your time to research available products on the market, speak with professionals and crunch the numbers.
What’s the best refinancing deal?
The best refinance deal is one that lowers your monthly payments and/or the total amount you’ll pay for your home by offering a lower interest rate and fees.
Before doing your research, ask yourself:
- What type of loan do I want? You might want to switch from a variable rate to a fixed rate or vice versa, or you might want to refinance to a mortgage that lets you make unlimited additional repayments on your home loan when you have extra cash. Make list of what you want in your new mortgage before getting started.
- What are the savings? Savings are one of the most important considerations when refinancing. While it’s good to opt for a lower interest rate, make sure that the new rate outweighs the costs of switching lenders. Ask your lender for details about any closing fees you’ll need to pay.
- What is the loan term? The length of the loan term can determine the cost savings that result from the refinance. For instance, if you have your mortgage refinanced after paying it off for 15 years and have the balance spread out over another 30-year period, you may actually pay more over the total 45-year duration despite the lower interest rate.
How to compare refinancing offers
To get the best deal on your mortgage refinance:
- Speak to your current lender. Ask your lender if this is the best deal you can get. Lenders will usually have a number of incentives to retain customers thinking of refinancing, including discounted interest rates and waived fees. Compare any deals on the table to refinancing offers.
- Compare interest rates. Decide on whether you want a fixed or variable rate.
- Look at fees. Compare the fees that apply to different lenders, including application fees, lawyer fees, origination fees and anything else rolled into the closing costs.
- Compare features. Consider the features that you’d like from your new mortgage, such as the ability to make extra payments without facing a penalty fee.
- Calculate the costs. Calculate the total cost of each mortgage you’re considering and compare it against the potential savings. Play around with the numbers: A shorter term can lower your interest rate and save you more in the long run, but it increases your monthly payment and vice-versa.
- Check your credit history. Review your credit file to ensure that it’s in good standing before submitting your application.
Compare loan details from each lender.
Potential lenders are required to provide you with an estimate, which is a three-page document that details your loan terms, projected payments, closing costs and other fees. To get the best possible deal, get quotes from a mix of lenders, including bigger banks, local banks and credit unions. You can work with a mortgage broker to choose a lender. It may lead to a better rate, but be aware of hidden costs or fees for the service.
The best refinancing deal is the one that saves you money and fits your needs. Find it by comparing mortgage lenders and calculating how much you can save with each one.
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