In the wake of the pandemic, mortgage interest rates have plunged to near-record lows, which has lead to an unprecedented boom in the mortgage finance industry. However, as more and more people rush to refinance, it’s important to remember that securing a good interest rate is only part of the goal when you’re shopping for a new loan.
In order to learn more about what else borrowers should keep in mind as they shop around for the best refinance rates.
ON IMPORTANT FACTORS FOR CONSUMERS TO CONSIDER WHEN THEY’RE SHOPPING FOR A LOAN:
There’s no denying that the interest rate is important. After all, it’s a huge contributor to what your monthly payment will be. As a rule of thumb, if you can save at least half a percentage point in interest, a refinance might be worth considering. Other important components include.
- Fees: Does the lender charge an origination fee or a processing fee to cover the costs on the loan? What other third-party fees (appraisal fees, recording fees) will you be charged during the process?
- Type of Loan: Should you consider switching from a 30 year loan to a 15 year loan in order to secure a better interest rate? Is it worth switching from an adjustable-rate mortgage to a fixed-rate loan in order to secure a stable monthly payment?
- The Lender: Do some research on the bank or lending institution that you’re going through for the loan. What type of loans do they specialize in? How much flexibility do they have with their qualifying requirements?
- How to receive that crucial information from a lender: Borrowers should ask their lender to provide them with a loan estimate. That’s the final document that will list out the interest rate you’re given, any fees you’ll be charged, and any other terms for that loan.