Be­fore re­fi­nanc­ing, check these 5 money-sav­ing tips

Daily Local News (West Chester, PA) - - BUSINESS - Mau­reen Hughes

Re­fi­nanc­ing might be a great choice for some home­own­ers as a way to gain ex­tra cash for home im­prove­ments or to lower monthly pay­ments. But it’s hard to know the best time and sit­u­a­tion for a re­fi­nance to be a good de­ci­sion. Check out these 5 money sav­ing tips.

Do the math

It’s im­por­tant to start by check­ing the break even point to see how long it will take for you to start sav­ing money in com­par­i­son to how long you plan to live in your home.

To find your break even re­fi­nance zone, take the to­tal sav­ings on your mort­gage per month and di­vide into the to­tal clos­ing cost amount. For ex­am­ple, if the clos­ing costs are $6,000 and you save $200 a month af­ter re­fi­nance, it will take 30 months to start sav­ing money. If you aren’t plan­ning to live in the home longer than 30 months, there is no point to re­fi­nanc­ing.

Get a han­dle on your credit score

One of the most im­por­tant com­po­nents of gain­ing a fa­vor­able in­ter­est rate on your re­fi­nance comes from your credit score. It’s amaz­ing how much your score af­fects your fees! For ex­am­ple, mov­ing your score up one point (from 689 to 690) can re­duce your fees by one point or $1,000 for ev­ery $100,000 fi­nanced! That’s a huge sav­ings!

Take a few mo­ments and

check to en­sure there are no er­rors lurk­ing within your credit his­tory - by do­ing an au­dit. You can or­der your credit re­ports from Equifax, Tran­sUnion and Ex­pe­rian. Be sure to re­port any er­rors im­me­di­ately. There is a po­ten­tial that solv­ing er­rors can raise your score and, there­fore, re­duce your fees.

‘No-cost-re­fi­nance’

An­other pos­si­bil­ity is to look for a loan that en­ables you to roll the out of pocket fees into the loan it­self, or even a loan with a higher in­ter­est rate but with with re­duced or elim­i­nated clos­ing costs. This sce­nario, also called a “no­cost-re­fi­nance”, is use­ful for home­own­ers who are look­ing to keep the prop­erty for a short amount of time (un­der 4 years) and it en­ables them to save money with­out ad­di­tional out of pocket costs.

Shop for rates

Don’t rely on lo­cal banks to give you the best rate. It’s best to shop around, even driv­ing to an­other city, or look­ing on­line. Of­ten mort­gage com­pa­nies or your real­tor will have a sug­ges­tion on a good com­pany to use. Make a few phone calls to lenders and get sev­eral good faith es­ti­mates to com­pare. Your goal is to get the best rate and the best loan terms, so the phys­i­cal prox­im­ity of the bank should not be an is­sue.

Ne­go­ti­ate

Don’t as­sume all of­fers are non-ne­go­tiable. In ad­di­tion to in­ter­est rates, many fees may also be ne­go­tiable. Us­ing mul­ti­ple quotes may help to per­suade lenders to ne­go­ti­ate fees to win your busi­ness. Other fees like ti­tle and es­crow may also be ne­go­tiable, de­pend­ing on the laws in your state.

Mau­reen Hughes is the Lead List­ing Spe­cial­ist of The Wayne Megill Real Es­tate Team of Keller Wil­liams Brandywine Val­ley in West Ch­ester. For buyer or seller rep­re­sen­ta­tion, or for more per­spec­tive on the lo­cal and na­tional real es­tate mar­ket, please email mau­reen­hughes@kw.com and visit The Wayne Megill Team site at http://www. wayne­megill­team.com.

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