The 5 most commonly-asked questions

When does it make sense to refinance?
Refinancing makes sense if:

• Rates are significantly lower than when you first purchased your home
• You wish to use the equity that's built up in your home
• You want to shorten your mortgage payment period
• One type of mortgage works better for you than another

  Other things to consider:
  Add up ALL the possible costs, including points, fees for inspections, recording, survey, private mortgage insurance, title insurance, underwriting and others. Figure your monthly savings by subtracting the monthly payment of your refinance loan from the monthly payment of your current mortgage. Look for hidden costs such as early pay-off penalties.

Is the lowest rate always the best deal?
Absolutely not. Many consumers get caught up in the "rate shopping" deception. The lowest rates do not necessarily add up to the greatest savings. You need to consider closing costs, extra fees and the length of time for which the rate is locked.

Look for companies that guarantee their closing costs upfront so you can compare the true numbers on deals.

Should I pay off my mortgage with my savings and/or retirement funds?
When you prepay part of your mortgage, you end up paying less in interest. In doing so, you may end up losing party of your tax break. An easy formula to remember is figuring the difference between your mortgage interest rate and the rate at which you take your deduction. If the net figure is less than what you can make investing the cash, you're better off investing and not prepaying your mortgage.

However, if you can't sleep at night because you have a large mortgage, and would gain peace of mind by paying it off, then do so. Often it is simply personal preference that determines the right answer for each individual.

How can I negotiate the best price for my new home purchase?
Sellers and the Realtors who represent them are more willing to accept a lower price on your purchase offer if you minimize the contingencies within that offer. The most common contingency is a buyer's mortgage commitment. Most purchase offers allow the buyer 30 to 45 days to obtain a mortgage commitment. In the meantime, the seller is left "hanging" until that commitment is obtained. The savvy buyer is the one who has a mortgage commitment in hand with the purchase offer.

How do I avoid inflated interest rates and closing costs at the closing table?
At application, companies will often underestimate the rate of interest and closing costs, simply to 'get the deal'. Currently, there are no regulatory mandates to control such practices. Protect yourself by choosing a mortgage company that guarantees closing cost estimates in writing and gives written rate lock commitments for a specified amount of days.