How to Switch My Mortgage

Maybe you have cleaned up your credit score or decided that current interest rates on mortgages are too attractive to pass up. Regardless of the reason for switching your mortgage, it’s easy to get burned by the mortgage process if you don’t follow a few simple tips. Sadly, the mortgage industry has shown that many professionals are not on your side. You’re going to need to know how the process works thoroughly before you step in to sign on the dotted line for your new loan.

Find any credit blemishes and clean up your credit report. The only free credit reporting service sponsored by the government is AnnualCreditReport.com. Request a copy and review for mistakes or credit problems that have already been resolved. Work with your creditors to have them report accurate information that will help clean up your credit score quickly.

Collect mortgage information using online aggregator sites and referrals from friends. Aggregator sites such as bankrate.com offer people switching their mortgage the ability to compare many different bank interest rates and fees on one single screen. Once armed with these numbers, visit your bank or credit union to gather more terms. Ask friends for good mortgage broker contacts who also can check rates and fees of many different banks.

Compare terms and interest rates. Although a 15-year loan may allow you to pay off your house earlier, you can always make 15-year payments on a 30-year loan, and if cash is ever short you’ll have the ability to scale back your payments without defaulting on your loan. If you decide to explore adjustable rate mortgages, compare the interest rate and adjustment terms. Some adjustable mortgages only raise or lower one or two percent after the initial fixed rate period, while others have the ability to change the interest rate dramatically.

Compare loan fees. Many shoppers only focus on interest rates, neglecting the fact that loans can have large origination fees, prepayment penalties, closing costs or points attached to an attractive rate. Ask your prospective lender for a good faith estimate detailing all fees that will be charged, as well as the interest rate on the new mortgage.

Call lenders who didn’t win your comparison war to see if they’ll match or beat the bank with the best rate and term. Bankers appreciate the opportunity to compete for your business and if they know there is a rate war, they may offer you a better deal to win the loan.

Sign the documents to switch your mortgage. Read the contract carefully before signing anything, making sure every detail matches the good faith estimate. Compare the interest rate, term, points and all fees on the document. If you feel like you won’t be able to do this at the closing table, ask for the closing papers a day early so you can read through them at home or take them to a professional to analyze the details on your behalf.

 

About the Author

As a former financial advisor to companies and individuals for 16 years, Joe Andrews knows financial planning and marketing from start-ups to personal budgets. He also writes on motor racing, board games and travel. Andrews received his B.A. from Michigan State University in English. He is currently working on a young adult novel.