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Consider Other Mortgage Refinance ProgramsIf you are thinking about a mortgage refinance, you might want to consider many types of mortgage refinance programs. For example, you might want to look into a 15-year fixed rate mortgage refinance. In this plan, your mortgage 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. (Of course, this also means you have less interest to deduct on your income tax return.)
You also might want to consider a mortgage refinance if you have an adjustable rate mortgage with high or no limits on interest rate increases. You might want to switch to a fixed rate mortgage or to an adjustable rate mortgage that limits changes in the rate at each adjustment date as well as over the life of the loan.
If you decide to apply for a mortgage refinance loan with a particular mortgage company, and if you do not want to let the interest rate float until closing get a written statement to guarantee the interest rate and the number of discount points that you will pay at closing. This binding commitment or "lock in" ensures that the mortgage company 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 can not get the mortgage company to put this information in writing you may wish to choose one that will provide this important information.
Most companies 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 particular rate. Because many people refinance their mortgages when rates decline there may be a delay in processing the papers. Therefore you may want to contact the company periodically to check on the progress of your loan approval and to see if additional information is needed.
Mortgage Refinance Costs
When you refinance your mortgage you usually pay off your original mortgage and sign a new loan. With a new mortgage refinance loan you again pay most of the same costs you paid to get your original mortgage. These can include settlement costs discount points and other mortgage refinance fees. You also may be charged a pre payment penalty for paying off your original loan early although some states prohibit this. The total expense for a mortgage refinance depends on the interest rate number of points and other mortgage refinance costs required to obtain a loan. To obtain the lowest rate offered most mortgage companies will charge several points and the total cost can run between three and six percent of the total amount you borrow. So for example on a $100000 mortgage the company might charge you between $3000 and $6000. However some companies may offer zero points at a higher interest rate which may significantly reduce your initial costs although your payments may be somewhat higher.
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