5 Important Refinance Tips

Having been a refinance advisor for nearly ten years, I have seen all kinds of problems ranging from hidden fees to fraudulent lending activities. Here are 5 tips that will ensure the most positive refinance experience possible.

1. Get an informal appraisal

• George, who was considering whether to refinance, paid for a full appraisal before consulting any lenders. Later on he realized that refinancing was not the right move for him to make at the moment and that he had wasted money on the appraisal. Speak to a real estate broker in your area to find out how much homes like yours in the area are being sold for. With this information you can get quotes by mortgage lenders and then decide whether a full appraisal is necessary.

2. Check with various mortgage lenders

• Know why you are refinancing- there are various reasons one would want to refinance. In order to get the right deal, you must figure out your own needs and research the types of loans that address those needs (See "Top 3 Reasons to Refinance").
• Know all the lender options- banks, credit unions, and mortgage brokers are just a few of the options. For more on lenders and how each type works, see "Finding the Right Mortgage Lender."
• Shop around and negotiate- this will allow you to find the most competitive deals and best rates.

3. Ask about all fees!

• Chris, another friend of mine, told me a story about how he was lured in by a mortgage lender claiming to have very refinance fees. After signing the document, he was informed of various closing costs he didn't expect to owe. Don't fall for this trap! Find out everything you need to know prior to closing the deal.

4. Consider the risk involved

• When that time to close the deal comes, consider the risk involved in the choices that you have made. If you chose an adjustable rate mortgage, can you deal with the consequences of the worst-case scenario (see the mortgage professor's article "Choosing Between Fixed & Adjustable Rate Mortgages")? If you chose a fixed rate mortgage, do you think these are the best rates you can get? In other words, did you look at trends to see that they won't be decreasing even more in the near future? Additionally, is this lender offering the best current rates and deal?

5. Get it in writing

• If we look at Chris's problem above, he didn't read the fine print. Make sure to make sure all terms promised by a mortgage lender are in the contract, and make sure to read the contract before refinancing.