Low mortgage rates have gotten many to consider refinancing

Low mortgage rates have some homeowners considering a refinance, even if it it’s been less than a year since they bought their home. And those who aren’t thinking about refinancing probably should consider the possibility, if they have the necessary income, credit and home equity.

“If they just bought the place in the last year or so, chances are their timetable hasn’t changed dramatically, yet mortgage rates have — and that opens the window of opportunity to refinance,” said Mr Paul Ho, chief officer at iCompareLoan.

Because they moved in recently, those homeowners presumably still plan to live in the home for a number of years, and therefore have plenty of time to recoup the costs of a refinance. Low mortgage rates have been hovering near all-time lows, with the 30-year fixed-rate mortgage averaging below 2% for the past few months.

If you are thinking of refinancing to take advantage of the low mortgage rates, you may want to look into your options now.

A mortgage — whether it’s a home purchase, a refinancing, or a home equity loan — is a product, just like a car, so the price and terms may be negotiable. You’ll want to compare all the costs involved in obtaining a mortgage. Shopping, comparing, and negotiating may save you thousands of dollars.

To get the best advantage in this low mortgage rates environment, you should obtain information from several lenders to get the best 2021 home loan with 1.05% interest.

Home loans are available from several types of lenders including banks and financial institutions. Different lenders may quote you different prices, so you should contact several lenders to make sure you’re getting the best price. You can also get a home loan through a mortgage broker. Brokers arrange transactions rather than lending money directly; in other words, they find a lender for you.

A broker’s access to several lenders can mean a wider selection of loan products and terms from which you can choose. Brokers will generally contact several lenders regarding your application, but they are not obligated to find the best deal for you unless they have contracted with you to act as your agent.

A mortgage broker could be your best bet in finding that best 2021 home loan with 1.05% interest. Be sure to get information about mortgages from several lenders or brokers. Know how much of a down payment you can afford, and find out all the costs involved in the loan. Knowing just the amount of the monthly payment or the interest rate is not enough.

Ask for information about the same loan amount, loan term, and type of loan so that you can compare the information. The following information is important to get from each lender and broker:

Rates

• Ask each lender and broker for a list of its current mortgage interest rates and whether the rates being quoted are the lowest for that day or week.
• Ask whether the rate is fixed or adjustable. Keep in mind that when interest rates for adjustable-rate mortgages go up, generally so do the monthly payments.
• If the rate quoted is for an adjustable-rate mortgage, ask how your rate and loan payment will vary, including whether your loan payment will be reduced when rates go down.
• Ask about the loan’s annual percentage rate (APR). The APR takes into account the interest rate, broker fees, and certain other credit charges that you may be required to pay, expressed as a yearly rate.

Fees

A home loan often involves many fees, such as loan origination or underwriting fees, broker fees, and settlement (or closing costs). Every lender should be able to give you an estimate of its fees. Many of these fees are negotiable. Some fees are paid when you apply for a loan (such as application and appraisal fees), and others are paid at closing. In some cases, you can borrow the money needed to pay these fees, but doing so will increase your loan amount and total costs. “No cost” loans are sometimes available, but they usually involve higher rates.

• Ask what each fee includes. Several items may be lumped into one fee.
• Ask for an explanation of any fee you do not understand. Some common fees associated with a home loan closing are listed on the Mortgage Shopping Worksheet.

Down Payments and Private Mortgage Insurance

Most lenders require 25 per cent of the home’s purchase price as a down payment. 5 per cent of this down payment has to be in cash and the rest can be paid using your CPF.

• Ask about the lender’s requirements for a down payment, including what you need to do to verify that funds for your down payment are available.
• Ask your lender about special programs it may offer and private mortgage insurance.

Once you know what each lender has to offer, negotiate the best deal that you can. On any given day, lenders and brokers may offer different prices for the same loan terms to different consumers, even if those consumers have the same loan qualifications.

The most likely reason for this difference in price is that loan officers are often allowed to keep some or all of this difference as extra compensation. Generally, the difference between the lowest available price for a loan product and any higher price that the borrower agrees to pay is an overage. When overages occur, they are built into the prices quoted to consumers. They can occur in both fixed-rate and variable-rate loans and can be in the form of fees, or the interest rate. Whether quoted to you by a loan officer or a broker, the price of any loan may contain overages.

Have the lender or broker write down all the costs associated with the loan. Then ask if the lender or broker will waive or reduce one or more of its fees or agree to a lower rate. You’ll want to make sure that the lender or broker is not agreeing to lower one fee while raising another. There’s no harm in asking lenders or brokers if they can give better terms than the original ones they quoted or than those you have found elsewhere.

Once you are satisfied with the terms you have negotiated, you may want to obtain a written lock-in from the lender or broker. The lock-in should include the rate that you have agreed upon, the period the lock-in lasts. A fee may be charged for locking in the loan rate. This fee may be refundable at closing. Lock-ins can protect you from rate increases while your loan is being processed; if rates fall, however, you could end up with a less-favorable rate. If that happens, try to negotiate a compromise with the lender or broker.

Remember: Shop, compare, negotiate to get that best 2021 home loan with low mortgage rates

When buying a home, remember to shop around, to compare costs and terms, and to negotiate for the best deal. You can usually find information on interest rates. Since rates can change daily, you’ll want to check often when shopping for a home loan. Also, be sure to ask the lenders about them.