A mortgage is most often the biggest expense anyone has, so naturally it’s a good place to look for possible savings. It is understandable that you might not have a mortgage right now, but the following is good information to remember when the time comes and you find yourself tackling home ownership.
The best way to shop for mortgages is to ask for both the rate and a truth in lending statement. A truth in lending statement should have all your closing costs on it, so you can choose the best rate with the lowest costs. Otherwise, it’s too easy to get confused when one rate is lower, but the points are higher, or when one has no points but the closing costs seem higher and the rate seems reasonable.
If you already own a home, you might consider refinancing if you’re going to continue to live in that house for a reasonable period of time and if you can save at least 2 percent or more on your current interest rate. You will usually incur a new set of expenses and closing costs when you refinance. You will need to shop around just like it is a brand new loan, because in essence, it is.
Some lenders advertise refinancing with no “out of pocket” expenses. This usually means that the cost of the refinancing is going to be added to your new mortgage balance. If this is the case, keep a close eye on these expenses. Make sure the payback is worth it. Ask yourself whether you plan to live in the home for a sufficient period to save enough on the lower payment to offset the expense of the refinancing. If so, take that monthly savings and put it in your nest egg.