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Refinance Considerations
Other Programs
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Refinance Considerations
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If you are thinking about refinancing your mortgage, you might want
to consider other types of mortgages. For example, you might want
to look into a 15-year, fixed-rate mortgage. In this plan, your
mortgage payments are somewhat higher than a longer-term loan, but
you pay substantially less interest over the life of the loan and
build equity more quickly. (Of course, this also means you have
less interest to deduct on your income tax return.)
You also might want to consider refinancing if you have an adjustable
rate mortgage with high or no limits on interest rate increases.
You might want to switch to a fixed-rate mortgage or to an adjustable
rate mortgage that limits changes in the rate at each adjustment
date as well as over the life of the loan.
If you decide to apply for refinancing with a particular mortgage
company, and if you do not want to let the interest rate "float"
until closing, get a written statement guaranteeing the interest
rate and the number of discount points that you will pay at closing.
This binding commitment or "lock-in" ensures that the mortgage company
will not raise these costs even if rates increase before you settle
on the new loan. You also may consider requesting an agreement where
the interest rate can decrease but not increase before closing.
If you cannot get the mortgage company to put this information in
writing, you may wish to choose one a company who will provide this
important information.
Most companies place a limit on the length of time (say, 60 days)
they will guarantee the interest rate. You must sign the loan during
that time or lose the benefit of that particular rate. Because many
people are refinancing their mortgages, there may be a delay in
processing the papers. Therefore, you may want to contact your loan
officer periodically to check on the progress of your loan approval
and to see if additional information is needed
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