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Navigating the home refinancing process

With interest rates near historic lows, now is a good time to consider refinancing your home. Refinancing a mortgage can potentially save you money over the life of a loan. Here are a few tips to help you navigate the refinancing process:

* Choose a reliable and trustworthy mortgage banker.

A mortgage banker is someone you should feel comfortable with, who should be frank with you about fees, flag potential issues, and help you make choices that best fit your financial situation. But where can you find the right mortgage banker?

“A quality mortgage banker will try to understand your goals and match your situation with the best possible loan, that doesn’t contain hidden fees or surprises,” says TJ Freeborn, mortgage professional at Discover Home Loans. “Mortgage bankers who are not looking out for you might sell you strictly on low interest rates or offer you a too-good-to-be-true deal without asking the proper questions or evaluating your needs.”

Start by doing research online with unbiased resources. Reach out to family and friends who also have refinanced or are in the process and compare research. Also, if you know a tax advisor or a real estate professional ask them about any questions or concerns. They may be able to provide new insight to help with your decision.

* Do your homework on loan options.

All mortgages are not created equally. It’s important to understand the components that go into determining the price of a mortgage, including points and fees, so you can accurately compare the offers. To find descriptions of home loan options, you can visit www.discover.com/home-loans/loan-options.

For instance, based on the situation you may choose an adjustable-rate mortgage versus a 15 year or 30 year fixed-rate loan. Make sure to evaluate your options with your mortgage banker and discuss what works best for you.

* Secure your low interest rate by locking it in.

Interest rates change almost daily and it’s important to talk to a mortgage banker about ensuring the best time to lock in your rate. If the loan process takes too long, there is a chance your approved rate may expire and therefore potentially increase. You may have the opportunity to get an extension, but often the fee for an expired rate can be costly. Make sure to lock in your interest rate to avoid closing at a higher rate.

* Understand the costs and fees of refinancing.

Before you jump into refinancing, make sure you understand not only the mortgage refinancing rates but the costs associated with refinancing. Closing costs generally include fees for origination, the appraisal, attorney review, lender and title, as well as insurance, taxes and escrow. Check with your mortgage banker to make sure that the closing fees are reasonable and that you are aware of all the factors that impact your refinancing cost.

Refinancing may be a worthwhile savings opportunity, but make sure to consider all of the factors before concluding it’s a wise financial decision for you.

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