[H560]Home Refinance Interest Rate

While the majority of lenders and mortgage brokers are honest and often provide a positive experience, it's very important that you be aware of some of the dishonest tactics you may encounter when you refinance your home loan. By avoiding these tactics you can save yourself thousands of dollars over the course of your mortgage loan. To be forewarned is to be forearmed....

1. Mortgage Penalties - If your current mortgage loan has a prepayment penalty, some lenders or mortgage brokers will promise you that they'll "handle" any penalties when you refinance, just to keep your deal. What they fail to mention is that you're actually paying them anyway. They'll typically figure those penalty fees into the interest rate that they offer you. So not only are you actually paying them, you'll pay interest on it to boot.

2. Legal Fees - Refinancing often requires legal fees for a variety of required expenses. In order to secure your business, some mortgage brokers will tell you that they will pay your legal fees when you refinance your mortgage with them. Again, they'll more than make up for it by giving you a higher interest rate.

3. Tied Selling - Unscrupulous refinancing tactics are one thing; this crosses the line into being illegal. Up selling and cross-selling frequently occur in business today. So if you have a mortgage loan with a particular lender, chances are you may have credit card accounts or unsecured lines of credit with that same lender. When a lender learns that you may be refinancing your loan with a different financial institution, you may be told that your credit card account or credit lines may be closed if you refinance your mortgage loan with someone else. This is called "Tied Selling" and is considered illegal.

4. Denigration of Funding Sources - In an effort to keep you from refinancing, some lenders have also been known to insinuate that your mortgage broker is funding your loan with an unreliable or even illegal source of funds. Sometimes they'll do anything to preserve their cash cow. Their primary interest is in keeping you where you are, overpaying on your loan.

5. Monthly Compounding - Some lenders will compound the interest on your refinance mortgage loan monthly instead of twice a year, while offering you a slightly lower interest rate. This results in you paying much more interest in the long run.

6. Come Again - If an institutional lender or mortgage broker lacks the knowledge or product base to put you into a refinancing vehicle that fits you and your situation, sometimes they'll tell you that another lender or broker won't be able to help you either and will suggest you come back in a year or so. Not only does this keep you from getting your refinancing needs met, it preserves you as a potential future client.

7. Double Dipping - This last tactic is only dishonest if the lender or mortgage broker does not fully disclose additional service fees. Some mortgage brokers will charge you an out-of-pocket fee as a means of compensating them for obtaining your home refinance loan. I consider this an unnecessary expense on your part because they are already being compensated by the lender, so they are essentially double charging for the loan - once by you and once by the lender. You may want to consider avoiding mortgage brokers that charge you an up-front fee to refinance your mortgage.