We realize that when you refinance a mortgage, it may be out of an urgent need, such as extra cash or debt consolidation. Even then you should try and find the best deal possible. In fact it this may be your opportunity to get a better deal on tour mortgage, so do not waste it.
Tie In Periods – watch out for the lender trying to get you to sign the contract for longer periods that will not allow you to refinance or change the lender in the future. as god as the deal may look right now, the lender should be willing to sign for a period of your choice. It is common for the lender who is absorbing the cost of your shifting the mortgage to sign you in for a minimum period in order to make the deal profitable. But it is equally important that you are comfortable with the terms of the new mortgage. If the lender tries to pressure you in to signing a deal for a longer periods than you are comfortable with, move on and look somewhere else.
End of promotional interest rate – Many lenders offer a very low rate of interest to new consumers. If you refinance in order to take the advantage of the promotional rate of interest make sure you know when the original interest goes into effect and what it will be. Be sure to calculate the amount of money you will save my migrating to the new mortgage. An important thing to know about lenders offering a promotional rate of interest is how much can they increase it in the future. Some lenders put a cap on as high as the interest rate can go. You may also have the option of choosing a variable rate mortgage or a fixed rate mortgage after the promotional rate ends.
Extra Charges By the lender For Switch Over – Most commonly all lenders will charge you an extra premature exit fee for leaving the mortgage before the term of the mortgage is over. However, if you want to refinance or shift to another lender once the term of the mortgage with the current lender is over, the lender should not charge you any fee. Also there should be no pressure tactics used such ‘ sign within the next 3 days to lock in this interest rate because after that it will go higher’.
Compulsory charges and insurance by the new lender in lieu of the low interest rate – When a new lender offers to refinance at a lower rate, he might make try and make up his money in the very beginning by charging you high processing fee and forcing you to take mortgage life insurance policy and mortgage premium protection policy. These add to the profit for the lender specially if he is the on providing the policies.
Rigid rules regarding transfer, refinance and consolidation – Ensure that the refinanced mortgage serves the purpose. Low interest rate is not the only criteria for refinancing. If you want to refinance for extra money or for debt consolidation, make sure that the new mortgage is specialized to make your requirements as streamlined as possible.
Right Time or Not – Getting the best refinancing deal is also a matter of timing. Any market can fluctuate between a sellers market and the buyers market. This also depends a lot on the location. If it is a buyers market, it means that the interest rates are low and many lenders are looking for your business. This is the time when you are likely to get the best mortgage deal with the services that you want from your lender. You can consult an IFA for getting a better know how on the market trends.