When you refinance your mortgage loan, not only will you be taking out a new loan, but you will also be paying off the balance owed on your current mortgage. Refinancing often makes sense if you can redo the loan at a lower interest rate, but it costs money to refinance. Depending on how sharp your negotiating skills are, cutting loan processing fees and closing costs is where you can save money.
Check your credit report. Get your credit score as well. Although you can get a free copy of your credit report every 12 months from each of the three major consumer credit reporting bureaus, in most cases, you have to pay for your credit score. Knowing your score beforehand, however, can give you more negotiating clout when you start approaching lenders.
Talk to five or six lenders. Find out what each lender has to offer before choosing. Fees and rates vary, so you need to compare. Which fees a lender is willing to negotiate differ as well.
Look into more than the interest rate and monthly mortgage payment you will pay when shopping for a mortgage refinance loan. Get information about the types of loans and loan terms different lenders have available.
Let each lender know what the competition is offering you. If you use this negotiating tactic, prepare to give the names of the other lenders and the loan terms they’re offering. Make it clear that you intend to give your business to the lender that offers you the best deal for your particular situation.
Find out if a lender is willing to reduce or waive the rate lock fee. Locking the rate for a specified number of days guarantees you the interest rate you want while your loan is processing. Since rate locks vary among lenders, it pays to compare lock costs and terms. Ask the lender to include a rate float-down provision so if interest rates fall during the lock period, you get the lower rate.
Ask your current lender to reduce or waive some of the fees associated with refinancing your mortgage loan. If you’re a loyal customer in good standing, the bank might not be willing to lose your business. Lenders often are willing to cover the costs of administrative fees -- such as processing fees and document preparation fees -- when refinancing a loan. You can also save on the cost of the loan by asking the lender to waive the upfront application fee, mortgage commitment fee and even the credit check fee.
Request a discount, or reissue rate, on the title insurance. If you go with the same company when you refinance, you may be able to save 40 percent or more on the cost of the policy. The lender may also be willing to accept an update on the title insurance rather than make you purchase a new policy.
Items you will need
- Credit report
- Credit score
- Wall Street Journal: Negotiating Refinancing Fees
- Bankrate.com: How to Negotiate Your Closing Costs
- Better Business Bureaus: Shop, Compare and Negotiate – But Move With Caution When Refinancing Your Mortgage
- Federal Trade Commission: Your Access to Free Credit Reports
- Nolo: Mortgage Rate Locks – How They Work
- Realtor.com: Refinancing? Save on Title Insurance
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