Re­fi­nance for cash or bet­ter rates

The Palm Beach Post - Residences - - Front Page -

For sev­eral years, econ­o­mists have cau­tioned that mort­gage rates could rise as the U.S. econ­omy con­tin­ues its eco­nomic re­cov­ery. But to date, rates have stayed near his­toric lows — in part due to volatil­ity in China and un­cer­tainty about the U.S. oil in­dus­try.

That’s tempt­ing many home­own­ers to re­fi­nance while rates are still fa­vor­able. Most re­fi­nancers seek to lower their monthly pay­ments, while oth­ers want to do a “cash-out refi” to con­sol­i­date bills, buy a new car or tackle a ma­jor home im­prove­ment pro­ject

Would re­fi­nanc­ing be a wise move for you? That de­pends, says Keith Gumbinger, a vice pres­i­dent at HSH As­so­ciates, which tracks mort­gage rates through­out the coun­try.

“Be­fore you do a refi, you’ve got to do the math. How much equity do you have in the house? What would it cost to do the new loan? And how long would your new term stretch out?” Gumbinger says.

Re­gret­tably, there are still a fair num­ber of would-be re­fi­nanc- ers who can’t take ad­van­tage of low mort­gage rates be­cause they have lit­tle or no equity in their prop­erty. But for po­ten­tial re­fi­nancers with a pos­i­tive stake, here are a few point­ers:

Take your time in shop­ping for the right len­der

Since the fi­nan­cial down­turn, the fed­eral govern­ment has be­come in­creas­ingly in­volved in the mort­gage mar­ket. The re­sult is that govern­ment-backed mort­gages now rep­re­sent the bulk of all home loans made in the United States. Mean­while, there’s been a de­cline in the num­ber of mort­gage bro­kers — in­ter­me­di­aries be­tween con­sumers and bankers — op­er­at­ing in the field.

“A lot of mort­gage bro­kers are gone. But more of the bro­kers and lenders who are left are real pros in their field,” says Guy Ce­cala, the CEO of In­side Mort­gage Fi­nance Pub­li­ca­tions, which pub­lishes in­dus­try news­let­ters and re­ports.

More strin­gent lend­ing stan­dards mean home­own­ers face a greater risk that their mort­gage ap­pli­ca­tion will be de­nied. To re­duce your risk of re­jec­tion, Ce­cala urges you to choose your len­der care­fully.

“You al­ways want to shop around, not only for the best pos­si­ble rates and fees but also for a len­der who of­fers good ser­vice and pro­cess­ing speed,” he says.

Use re­fer­rals to help you se­lect the best len­der

Un­like those seek­ing a mort­gage for a home pur­chase, those seek­ing to re­fi­nance don’t have the ben­e­fit of a list of lenders handed to them by a real es­tate agent. But there’s no rea­son that re­fi­nancers can’t also turn to lo­cal real es­tate agents.

As Ce­cala says, agents are in a good po­si­tion to know which lenders will of­fer the smoothest and swiftest loan pro­cess­ing. Af­ter all, they work with lenders year af­ter year and need to iden­tify those most likely to get their deals to the fin­ish line on time.

“Con­tact at least three dif­fer­ent types of lenders be­fore mak­ing your se­lec­tion. Try to in­clude on your list one mort­gage bro­ker, one ma­jor bank and one smaller bank or credit union,” Ce­cala says.

Don’t give out your So­cial Se­cu­rity num­ber pre­ma­turely

Of course, no qual­ity len­der will guar­an­tee that your mort­gage rate has been locked in with­out first pulling your credit scores. But that doesn’t mean you should give out your So­cial Se­cu­rity num­ber, a credit-score re­quire­ment, while you’re still com­par­i­son shop­ping.

You shouldn’t have to re­lease your pri­vate in­for­ma­tion just for rou­tine rate shop­ping. And get­ting your credit checked too of­ten can hurt your scores.

“You need to be guarded about your pri­vate in­for­ma­tion,” Gumbinger says.

Try to steer clear of ‘junk fees’

There are a num­ber of costs and fees in­volved in re­fi­nanc­ing, and only some of them are im­posed by lenders. Th­ese len­der-based fees in­clude the cost for a home appraisal and a copy of your credit re­port. Also, other charges, of­ten called “junk fees,” are im­posed

Ellen James Martin

Smart Moves

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