As the former owner of a mortgage company, I know that refinancing your mortgage can be difficult and complicated. Here are six tips to help you get the most out of your mortgage refinance:
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Focus on the interest rate, not the payment. If you've been paying on your mortgage long enough, you can drop the payment just by starting over with a fresh 30 year mortgage, but that won't accomplish much.
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Remember that the principal payments you make with your mortgage payment are just like savings. The more the merrier. You're just moving money from your checking account to your "home equity" account.
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Home equity is hard to spend - and that's a good thing! It is relatively difficult to access the equity in your home these days; it was a lot easier before 2008. Thank heaven for small favors. Be glad that the market is imposing some discipline on us, making us build up equity in our homes. Home equity tends to translate into more stable home environments, neighborhoods, and communities.
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Choose the shortest maturity you can afford. Mortgage rates drop as the maturity or length of the mortgage gets shorter. In other words, a 15 year mortgage typically has a lower interest rate than a 30 year mortgage. Payments rise as maturity shortens because you pay more principal every month (see #2).
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Don't spend the money you'll save until after you have the loan. The loan officer who helps you with your loan application will not be the person who decides whether or not your loan is approved. Almost certainly, the loan officer is more optimistic about your loan approval than the underwriter (who will decide) for this simple reason: the loan officer is paid on commission and he has no shot at a commission for a loan he doesn't submit, but he has a shot at a commission on even a long shot mortgage application.
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Do everything the loan officer asks you to do. Applying for a mortgage can be frustrating. The loan officer will sometimes ask you to do things that seem to make less sense than hopping up and down on one foot while rubbing your tummy. If you want the mortgage, do it anyway. Feel free to ask why you are being asked to jump up and down on one foot while you rub your tummy, but ask while you're hopping and rubbing. Generally, such requests are really coming from the underwriter who may not have any direct communication with the loan officer so he may not even know why. Refusing to provide requested information will likely result in not getting your loan approved.
