Thursday, December 3, 2015

Things to Remember When Comparing Mortgage Refinance Rates (part 2 of 2)

Ask how often the lender re-calculates the outstanding interest.
The best way to treat a mortgage loan – or any loan for that matter – is to get out of it as fast as you can.  This is why it's always a good decision to have a personal payment plan set up before you take out a loan.  A bi-monthly payment scheme, for example, will help you pay off the loan earlier and avoid additional charges.

Check with your lender to determine how often they make loan recalculations.  Yearly recalculations are disadvantageous to you, so when comparing mortgage refinance rates, look for companies that recalculate frequently – daily if you can find them or at the very least, monthly.

Why is this important?  In the future, you could have the opportunity to get a good amount of cash from a bonus or a promotion and would like to use that to pay off your loan.  If your lender does not recalculate often, you could be stuck on the old interest rates, regardless of how much money you put in.  If your lender recalculates often, you could start paying for your loan at newer, lower interest rates.

Lock it in.
Take advantage of a good mortgage refinance rate by having it locked in by your lender.  A lock period is the period of time in which the current or agreed-upon rate is honored by the lender.  Meaning, the rate will stay that way within a specific amount of time.  This can range from a minimum of 15 days to a maximum of 60 days.

The lock-in period you choose will of course depend on how long you want to keep the interest rate and on how much you can afford to pay.  Shorter lock periods will have more affordable mortgage rates while longer periods will charge higher rates.  When comparing mortgage refinance rates, try to compare the lock-in periods as well.

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