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How do I shop for a refinance?

By   |  Posted in Ask The Expert

Q:  What info should I be comparing when calling local banks to refinance—APR, closing cost, etc.?

A: The most important component of your refinance will generally be the interest rate, so you'll of course want to pay attention to that. Fees and closing costs matter, but whether you want or need to pay them will depend upon your situation. There are times when paying costs to obtain the lowest possible rate can make sense and times when it does not. For more information, be sure to read our article, mentioned in the 'recommended reading' section below.

To see this in action, you should check out HSH.com's Tri-Refi refinance calculator. Plug in the numbers for your existing loan and a potential new loan, then compare what your costs would be over time if you paid fees out of pocket, included them into the loan amount or traded them off for a slightly higher interest rate. The results may surprise you!

 Shopping by APR can be confusing, since different lender fees and policies can affect the outcome. It is possible for two loans to have identical rates and fees and different APRs. Conversely, two loans could have the same APR but different interest rates. Because of this, it is usually better for you to focus instead on the two most important components of APR--interest rate and fees.

 Deciding beforehand whether you want (or can afford to) pay fees up front can help determine how you approach the shopping process and what interest rate you'll need to make your refinance work. Once you've got that in mind, you can then shop for that interest rate, using both your own research and with some of the great offers you might find from mortgage lenders at HSH.com.

You'll want to ask lenders about how long it is taking them to close refinances such as yours, and select a commitment period close to that for your lock in.

About the author:
A 25-year expert observer of the mortgage and consumer debt markets, Keith Gumbinger has been cited in thousands of articles covering a wide range of consumer finance and economic topics in outlets ranging from the Wall Street Journal to the Bottom Line newsletters. He has been a featured guest on national broadcasts for CNN, CNBC, ABC, CBS and NBC television networks and has been heard on NPR and other national and local radio programs. Keith is the primary researcher and writer for HSH.com's MarketTrends newsletter and has authored or co-authored a number of consumer guides on mortgages, home equity, refinancing and more.

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