Refinance Questions to Remember
You’re clear on your refinance goals, and you’ve crunched the numbers and are ready to apply. If you are getting a cash-out refinance you know how much cash you need. You know what kind of loan you want (fixed or adjustable-rate) and whether or not you want to pay discount points. The lender has told you how much cash you’ll probably need to bring at closing. But in order to avoid surprises at closing and beyond, ask your lender the following additional questions about your loan.
Is there a pre-payment penalty?
In other words, will the lender charge you if you pay off the loan early? Refinancing counts as a “pay-off” so if you think you might be in your home long enough to consider another refinance down the road, you might want to avoid a loan that carries a pre-payment penalty.
Will my interest rate change between now and closing?
Interest rates change daily, usually by only a small amount. However, over several weeks, small changes can add up to a big change. Ask your lender about “locking-in” your interest rate, when they recommend doing so and whether there is a fee for that. Your lender may also offer a “float-down” option: if interest rates fall after you’ve locked in, you can take the lower rate. There may be a fee for this service.
Will my loan be sold?
It is not uncommon for lenders to sell your loan to another company for “servicing”. The loan’s servicer is the company you make your payments to. This is no cause for alarm, but in order to avoid surprises later, this is a good question to ask. Occasionally, a lender will sell your loan before closing, in which case, the new lender’s name will appear on your loan documents.
When are payments due and what are the penalties for a late payment?
Payments are generally due on the first of the month, and many lenders allow a fifteen day grace period. Some lenders require full repayment of the loan amount in the case of multiple missed payments. Of course, if your loan will be sold, you’ll need to get this information from the new servicing company.
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