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EDITOR'S NOTE: Refinancing activity is soaring, so Bankrate asked personal finance columnist Dr. Don Taylor to answer some of our readers' most pressing questions about getting a new mortgage.
Dear Dr. Don,
I am interested in refinancing my mortgage, but
I'm unsure about who to talk to and what to expect.
Can you give me some advice and recommendations
on who to go to so I don't get ripped off?
-- Jose Jumpstart
Dear Jose,
I'm a big fan of getting my ducks in a row before going into the marketplace. For mortgage refinancing, that means knowing the terms of your existing mortgage and the latest mortgage rates, as well as reviewing your credit report and fixing errors. You also should know your credit score and goals in refinancing.
You've already come to the right
place for finding the latest interest rates. Bankrate's
weekly mortgage
rate analysis is released every Thursday morning,
as is its Mortgage
Rate Trend Index. The mortgage rate analysis
feature tells you where rates are; the Mortgage
Rate Trend Index tells you where mortgage experts
think rates are going. You can have both delivered
as an e-mail
alert Thursday mornings.
Reviewing your credit reports allows
you to make sure there are no errors in the reports.
The Bankrate feature "Fixing
mistakes on your credit report" will help
you through the dispute process.
You're entitled to one free credit
report each year from each of the consumer reporting
agencies: Equifax, Experian and TransUnion. However,
you have to pay for credit scores. The Bankrate
feature "How
to get your free credit report" tells you
how to get the reports. You'll have the opportunity
to order the scores with the free reports.
If you're going to comparison shop
among mortgage lenders, you want to do it in a
relatively short period of time -- probably less
than a month -- so the comparison shopping doesn't
negatively affect your credit scores.
What's your goal in refinancing?
It could be lower monthly payments, a lower interest
rate or both. If you have only 20 years remaining
on your mortgage, refinancing into a 30-year mortgage
at a lower interest rate still could result in
higher total interest expense because you've just
extended your loan out another 10 years.
If you don't need to extend the mortgage
term to make payments more affordable, look at
shorter refinancing terms. The Bankrate calculator
"Will
you save by refinancing your mortgage?" helps
you with the math. Remember, you have to plan
to be in the house and the loan for a while
to have refinancing make sense.
You can pick your lenders by using
Bankrate's "Compare
interest rates" page, or you can work with
a mortgage broker. If you're going to work with
a mortgage broker, I recommend you seek out an
"upfront mortgage broker" as discussed by the
mortgage professor, Jack Guttentag, in the Bankrate
feature "Want
your mortgage wholesale? Try an upfront broker."
Finally, take a look at the FTC Facts for Consumers Guide "Looking for the Best Mortgage: Shop, Compare, Negotiate" and use the Mortgage Shopping Work Sheet available in that publication.
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