Mortgage Refinancing Tips, Tricks and Advice

I want to pull together a range of tips and advice for home owners that want to take advantage of the low rates and refinance their mortgage. Seems like a great time to refinance with low rates, but with tighter lending standards it also seems more complex than ever. What are some tips and tricks you would give those considering this? Anyone out there that recently refinanced and can share experiences on how they locked in a great rate?

Since my expertise is valuation-related, I'll focus on that. One of the biggest mistakes homeowners make is being realistic about the value of their home. The old way was too look at a similar house in your neighborhood and assume you house was worth more. It has been widely reported in many housing markets that home prices are declining. Get realistic and understand what is happening right now. Trulia is a great place to start.

Once the lender sends the appraiser to inspect your property - this sounds pretty basic - but make sure the house "shows" well, is clean and fully accessible. Don't follow them around the house but make sure you are available for questions. Summarize the features and upgrades and the key amenities in the house for the appraiser. You want to make sure the appraiser doesn't overlook anything. It's helpful to provide a floor plan if available. Your are not trying to cause an overvaluation - rather, you want the property to be valued at full market. I am amazed at how poorly homes are readied for an appraisal.

Any relevant market activity such recent contracts or activity on nearby listings you are aware of in the neighborhood is also helpful - make sure you can provide contacts for the appraiser to confirm this information. Contracts show price levels now, closed sales show prices 45 days prior or in many cases longer and listings, combined with an understanding of how long they have been on the market, show the upper limit to value.

Point (Mortgage)

Refinancing lenders often require an upfront payment of a certain percentage of the total loan amount as part of the process of refinancing debt. Typically, this amount is expressed in "points" (also sometimes called "premiums"), with each "point" being equivalent to 1% of the total loan amount. Therefore, if the refinance option selected involves paying three points, then the borrower will need to pay 3% of the total loan amount upfront. Most refinancing lenders offer a variety of combinations of points and interest rates. Paying more points typically allows one to get a lower interest rate than one would be capable of getting if one paid fewer or no points. Alternately, some lenders will offer to finance parts of the loan themselves, thus generating so-called "negative points" (also called discounts).

The decision of whether or not to pay points, and how many points to pay, should be taken in consideration of the fact that with points, one tends to trade a higher upfront cost in exchange for a lower monthly premium later on. Points can be paid out of the cash saved by refinancing the loan in the first place.