Homeowners refinancing their homes for the first or even second or third time should thoroughly research all available options to ensure they get the best rates and terms. Homeowners sometimes get lazy when it comes to refinancing. It may be that interest rates have dropped significantly or that the financial situation has changed and a refinance is necessary. While the homeowner may be aware of the need to refinance, the homeowner may not realize that sometimes it takes a lot of work to find the best rate and terms.
Homeowners often tend to refinance with the same lender that originated the original mortgage or with the same lender that handled the previous refinance. The theory behind this reasoning is the same as the “if it ain’t broke, don’t fix it” thinking. These homeowners believe that their current mortgage is adequate and they are happy with their current lender, so there is no need to investigate further options. However, this flippant attitude can be quite costly to the homeowner.
Try all options
Homeowners who are considering refinancing their home should contact a number of lenders and get interest rate quotes from each of them. When soliciting quotes, homeowners should consider all available options, but should limit those options to established lenders. While newer lenders may offer great rates and loan terms, it is considered quite dangerous to work with this type of lender as opposed to more established lenders.
Homeowners wishing to further investigate a smaller lender with no established history should proceed with caution. Unless the lender has a trusted friend or family member willing to vouch for the lender, homeowners should investigate these small lenders carefully. Visiting a website address is not the best way to ensure trustworthiness. Designing a professional looking website is a fairly simple process. Most web designers can design and upload such a site in less than a day.
Friendly Competition
When comparing the most favorable rates for a purchase, homeowners should be well aware that they are shopping around for rate quotes and not making an immediate decision. Lenders who know they have some competition may be more likely to offer a lower rate than if they think the homeowner is considering other options. While this may not seem fair to lenders, the refinancing business is a competitive business. Just as a plumber might offer the most competitive rate if he knows the homeowner is seeking estimates from many different plumbers, lenders do the same. It does not help them financially to make money from the homeowner and have the homeowner refinance their mortgage.
Some lenders may think the homeowner is bluffing and may not initially offer the best rate. However, if the homeowner rejects the offer and says they have a better offer from another lender, the first lender may be tempted to offer a lower rate just to see if they can sway the homeowner. While cost is certainly important, it is not the only factor to consider. Some homeowners may refinance with a lender that offers a slightly higher rate if the homeowner feels that this lender is more responsive to his needs.