It is well-understood that refinancing your mortgage can help lower your monthly mortgage payments and save you thousands of dollars over the life of your loan. Doing so may even shorten the amount of time it will take you to pay off your debt and putting even more dollars back in your pocket at the end of each month.
The first thing you'll have to do in order to start the refinancing process is to get a new loan to replace the existing mortgage, which means finding a lender. You could just walk into the local bank and ask to borrow money, of course, but you may not be finding the best deal from the most conveniently-located lender.
Indeed, you may be surprised to learn that putting in a little more effort to choosing the right lender could lead to a far bigger payoff from refinancing. Here are a few things you may want to consider to find the best mortgage refinance companies.
- Finding the right lender for a refinance requires some time and effort, but it can save you money and prevent costly mistakes.
- There are many options to choose from including traditional banks and credit unions, as well as specialized mortgage companies.
- Borrowers shopping for mortgage rates can use a comparison tool like LendingTree to evaluate refinancing offers from different lenders.
- So-called no-cost mortgages—in which borrowers don’t pay closing costs but fees are built into the mortgage interest rate instead—can be a good option for certain homeowners who plan to move within a few years.
Finding the Right Lender
Many people think of their local bank or credit union when they consider refinancing, but these are not the only potential sources of refinancing. Many consumer finance companies, investment firms, and savings and loan institutions also offer mortgages. There are also specialist firms that only deal in mortgages.
While it may be time-consuming and very tedious, sorting through the large variety of lending institutions and the different offerings available in the marketplace is well worth the effort. Taking the time to find the right lender can make a big difference in the amount of money you will spend in fees to obtain a loan as well as in mortgage interest.
When you begin your search, keep in mind that loan officers are paid based on the transaction you make through a commission or fee. This provides them with incentives to sell you their service. Note that this does not make loan officers bad people; it just means that you should do a little work on your own to make sure you understand every option available to you, in addition to the pros and cons of each.
Independent mortgage brokers can help you compare the services of many lenders and work to secure the best rate free from bias. As the borrower, you pay the broker a fee to provide assistance with finding a mortgage and facilitating the loan origination process on your behalf. The lender may also pay them a fee in exchange for bringing them your business.
As with bank loan officers, mortgage brokers are paid by making a sale, and their fee structure can and will vary. Here again, a little knowledge and some comparison shopping are likely to serve you well. A small difference in your interest rate can add up to huge savings over the term of your mortgage. And as with many traditional financial services, there are now several online tools available to help you avoid broker fees.
Mortgage lending discrimination is illegal. If you think you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development (HUD).
Mortgage Lender Costs
One of the key variables to consider with mortgage lenders is the cost of refinancing. Understanding the terms of your new loan—the amount of the monthly payment, the number of years until it's paid off, the interest rate, fees, whether or not a prepayment penalty is accessed if you pay off the loan early—will provide insight into the various costs.
That is why it's crucial to review the "Good Faith Loan Estimate" (GFE) document provided by your lender. The Loan Estimate is a legally mandated document designed to protect borrowers. It requires lenders to provide a standardized disclosure of the costs associated with the loan. This written estimate details what you will be required to pay at closing, including the cost for all points, processing, legal fees, filing fees, and closing fees.
While the law does not dictate the price that each lender charges for the various services it offers, the loan estimate does provide a useful tool for comparison shopping. One loan provider may charge more for legal fees and less for filing fees. Another may have lower overall fees but charge a higher interest rate. A careful review of loan estimates from the lenders you are considering will help you find the best deal.
Your ability to refinance depends in large part on your credit score—if your score is lower than when you originally purchased your home, refinancing might not a good idea because this could quite possibly increase your interest rate.
Consider the Mortgage Lender's Service
On the service side, getting your questions answered in a timely and accurate way is an important element of the process. Obtaining a refinance requires quite a bit of paperwork, as well as the collection and dissemination of a significant amount of personal information. Having a single, reliable point of contact for your questions can make the difference between a smooth, easy process and a tough experience.
Having the loan ready in time for your closing is another important consideration. Final documentation is often unavailable until just days—or even hours—before the actual closing, and coordinating the schedules of the various parties involved in the transaction can be a challenge. A dependable lender will help to keep everything on track and make a significant contribution to your personal peace of mind.
At one time, researching and gathering information was a time-consuming process requiring visits to multiple lenders or hours on the telephone. While those options are still available, technology has helped to make the process much easier. With online mortgage rate calculators, you can hop onto a site and find convenient ways to compare lenders and gain insights into the range of interest rates available for the sort of loan you're seeking.
The Best Online Refinance Companies
Comparing loan terms and characteristics isn't the only thing you can do online. Nowadays, many of the best lenders do business exclusively online. What you lose in personal face time, you make up for in more advantageous rates, since these firms don't have the overhead expenses of brick and mortar institutions, advocates argue. Three of the most popular online lenders to consider include Quicken Loans, Guaranteed Rate, and loanDepot.
Quicken Loans is a Detroit-based lender with an impressive branding effort and is one of the largest online retail mortgage lenders in the country. The company is known for having competitive rates and several unique mortgage products. It offers fixed-rate, adjustable-rate, and a customizable "YOURgage"—offering repayment terms that you can tailor to your needs and not just the typical 15- and 30-year mortgages provided by most companies. You can choose any loan term from eight to 30 years (in one-year increments) and get a fixed rate.
This can really benefit those refinancing a mortgage: If you have, say, 23 years left on your current loan and want to refinance but do not wish to reset your term to 30 years, or take out a shorter 15-year loan (which will bring higher monthly payments), you can obtain often a customized 23-year loan, thus maintaining your existing term but at better rates.
Quicken also offers Rocket Mortgage. Everything is done online—from the initial application and credit check to scheduling your home appraisal—and approval takes minutes. Rates are locked in for 15 to 60 days while consumers shop around for a home. Quicken Loans has an A+ rating with the Better Business Bureau (BBB).
Guaranteed Rate offers an online mortgage application process that is similar to Quicken Loans' Rocket Mortgage. You can even complete your initial application and view your credit scores with the three major bureaus for free. Based on what your credit qualifies you for, the mobile app allows you to select an interest rate and fee structure, and lock it in early in case rates increase. Guaranteed Rate had an A+ rating with the Better Business Bureau.
loanDepot is a direct mortgage lender, meaning the company provides the funds at closing itself rather than serving as a middleman. So there is one fewer entity that has to be paid, which often translates to a better deal. Along with its competitive rates, loanDepot can give you a rate quote online in seconds.
You can also pick up the phone and speak to one of its lending officers. It waives lenders fees and will reimburses your appraisal fee if you refinance your home again in the future. The company has an A+ rating with the Better Business Bureau.
No-Closing-Cost Refinance Lenders
No matter what promotions say, refinancing always incurs fees. However, there are so-called no-cost mortgages that let borrowers avoid paying closing costs directly. Instead, the comparable fees are built into the mortgage interest rate itself, making it slightly higher than that of a conventional mortgage.
Even so, this kind of mortgage may give borrowers a chance to cover the closing fees to obtain the refinanced mortgage they need to stay in their homes. It can also be attractive to individuals who plan to move within a few years. With a traditional mortgage, it typically takes a few years for a borrower to recoup closing costs. But if the higher mortgage rate with a no-cost instrument isn't significant, it may work out to be less expensive than paying than the upfront closing costs.
If you are looking for a no-closing-cost lender to refinance, consider LendingTree, which is basically a huge search engine that allows consumers to comparison shop for loans. On LendingTree, individuals seeking a refinanced mortgage can use the calculator to input the property specifics: the value of the property, the amount of the original loan, the start date, and term of the loan. Once all necessary information is calculated, they can receive up to five loan offers from different lenders.
The Bottom Line
Finding the best company to help refinance your mortgage depends on your personal circumstances. There are many different options available. Consider the costs and services that each refinance company brings to the table, and whether they suit your needs. After all, it is your hard-earned money at stake. The more time you invest in researching your refinance company, the better the payoff will likely be.