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Perhaps you are looking to refinance your existing mortgage to save money on interest or even to cash out home equity during the process. Many borrowers are finding that refinancing is an only option to avoid foreclosure or bankruptcy during the current economic crisis. Whatever your reason, you should look to save money all along the way with four proven strategies.
Get Your Credit Score Up To Par
Strategy One: Close open accounts to improve your credit score. A good credit score can mean a lower interest rate. Nothing can drag your score down faster than having a lot of open accounts (even if you are not using them). Because your lender will look at your debt ratio of available versus used credit and how you actually use the credit available to you, having open account is very detrimental to your credit score.
Credit cards are often a huge culprit of open, inactive accounts. To close your account, write a letter to your credit card company requesting that the account be closed in addition to calling them. Check your credit report around a month or so later to make sure that the account was closed and make sure that the notation is made that you closed the account voluntarily.
Avoiding Unnecessary Costs
Strategy Two: Avoiding private mortgage insurance by not cashing out extreme amounts of equity. If you cash out equity of more than 80%, you will have to pay for private mortgage insurance to secure your loan. This insurance is not inexpensive, and can run in the thousands each year. If you cash out equity, cash out a lower amount to avoid private mortgage insurance costs.
Hidden Fees And Who Should Pay Them
Strategy Three: Choose a lender who either absorbs fees or helps share their costs. Have each lender spell out the fees that are associated with your mortgage refinance (which are very similar to the fees that you paid when you originally bought your home). Some fees may be appraisal fees, courier fees, document preparation fees, administrative fees, filing fees, and more. Go with a lender who does not nickel and dime you to death, or one that will bear some of the costs of the refinance in order to gain your business.
The Best Kept Secret Your Banker Does Not Want You To Know
Strategy Four: Go with a nonconventional online lender. Many borrowers are finding that refinancing their mortgage costs a heck of a lot less when using the services of an online lender or lending institution. There are many reasons why it is advantageous to do so, but the most obvious is the competitive lending environment that you will find with online lenders.
There are literally so many lenders online that they compete for your business, which means that you can get your mortgage refinanced at a significantly lower rate of interest by dealing with an online lender or lending company as opposed to the banker down the street. Further, your mortgage refinancing is easier online, due to the nearly paperless application process and quick turnaround of approvals.