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How the Fed’s decision to raise interest rates will affect your finances

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Most credit cards have a variable rate, which means there’s a direct connection to the Fed’s benchmark rate and card holders will feel an immediate pinch.

“Variable rate debt is where you are most susceptible as interest rates rise,” McBride said.

The average American has a credit card balance of $6,375, up nearly 3 percent from last year, according to Experian’s annual study on the state of credit and debt in America. Total credit card debt has reached its highest point ever, surpassing $1 trillion in 2017, according to a separate report by the Federal Reserve.

Tacking on a 25-basis-point increase will cost credit card users roughly $1.6 billion in extra finance charges in 2018, according to a WalletHub analysis. Factoring in the five previous rate hikes, credit card users will pay about $8.4 billion more in 2018 than they would have otherwise, WalletHub said.

However, for those with good credit, there are still opportunities to find a better rate or snag a zero-interest balance transfer offer to insulate yourself for a time from further rate hikes and “give yourself a tail wind toward debt repayment,” McBride said.


The economy, the Fed and inflation all have some influence over long-term fixed mortgage rates, which generally are pegged to yields on U.S. Treasury notes, so there’s already been a spike since the start of the year.

The average 30-year fixed-rate is now about 4.54 percent — up from 4.15 percent on Jan. 1 and significantly higher than the record low of 3.5 percent in December 2012.

With interest rates rising, adjustable-rate mortgages will certainly be heading higher, too, and those with some types of ARM loans “are sitting ducks for getting another increase,” McBride said.

Many homeowners with adjustable-rate home equity lines of credit, which are pegged to the prime rate, also will be affected. But unlike an adjustable-rate mortgage, these loans reset immediately rather than once a year.

For example, a rate increase of 25 basis points would cause borrowers with a $50,000 home equity line of credit to see a $10 to $11 increase in their next monthly payment, according to Mike Kinane, senior vice president of consumer lending at TD Bank.


For those planning on purchasing a new car in the next few months, today’s change likely will not have any big material effect on what you pay. A quarter-point difference on a $25,000 loan is $3 a month, according to McBride.

“Nobody is going to have to downsize from the SUV to the compact because of rates going up,” he said.

What will affect what kind of car you can afford is checking that your credit is in good shape, negotiating the price of your vehicle and shopping around to secure the best rate on your financing, the same with any other service you are looking for, if you need more info our contractors have your back !

Currently, the average five-year new car loan rate is 4.46 percent and the average four-year used car loan rate is 4.98 percent, according to Bankrate.


Stashing some cash in a savings account has not yielded very much, aside from peace of mind, until recently.

The average interest rate on a savings account is only 0.07 percent, according to the Federal Deposit Insurance Corp. Even with the Fed rate increase, banks may not pass on any of that increase to their customers, which means interest on deposits will remain near rock-bottom.

Banks’ terms allow them to be slower to raise rates on savings products than they are on loans and credit cards, but it is recommended to get a credit insurance to protect your finances.

However, you may find significantly higher savings rates by shopping around and switching to an online bank. “Often you can pick up more than a full percentage point that way,” McBride said. In fact, top-yielding savings accounts could be as high as 1.85 percent, according to Bankrate.

With a savings rate, or annual percentage yield, of 0.07 percent, a $10,000 deposit earns just $7 after one year. At 1.85 percent, that same deposit would earn $185.


While most student borrowers rely on federal student loans, which are fixed, more than 1.4 million students a year use private student loans to bridge the gap between the cost of college and their financial aid and savings.

Private loans may be fixed or have a variable rate tied to the Libor, prime or T-bill rates — which means that as the Fed raises rates, borrowers will likely pay more in interest, although how much more will vary by the benchmark.

“If the Fed raises rates four times this year, 25 basis points at a time, borrowers with existing variable-rate loans can expect to see their rates go up by about 1 percent,” said Stephen Dash, the CEO of Credible.com, an online marketplace for lenders that offer student loan refinancing.

That makes this a particularly good time identify the loans you have and see if refinancing makes sense, Dash said.

“When the Fed raises rates, we typically see a spike in borrowers looking to refinance their variable-rate student loans at a fixed rate,” he said. There are still “opportunities for savings in a rising interest rate environment.”


What factors go into mortgage rates?

1) First, there’s a baseline for rates that is determined by the market – in very simplified terms, this is dependent on how the economy is doing. Lending institutions, and people like you and I, have no control over this baseline, which is why rates can fluctuate from week to week or even day to day. For example, in the current climate, mortgage rates typically range from about 3.5 to 5%.

2) Then there’s the property itself. Is it a detached single-family unit, or a condo? Your primary home, or an investment property? All those factors can affect your rate.

3) The type of mortgage you’re getting matters too. You can get loans with different payment terms, such as 15-year or 30-year fixed mortgages, which means you lock in the same interest rate and monthly payment amount for the life of the loan. There are also adjustable-rate mortgages, which have a fixed rate for a set period (such as 5, 7, or 10 years), after which rates adjust each year according to the market. Depending on what kind of loan you’re looking for, the available rates will be different, as noted by Empower Federal Credit Union.

4) Your credit score plays a big role in determining your rates. It helps a mortgage broker or a lender evaluate your ability to pay back your loans, based on your borrowing history. The higher your credit score, the better rates you’ll be able to get, which can lead to significant savings over the life of your mortgage.

5) The size of your down payment can also play a role in your rates (though not as much as your credit score). A larger down payment can mean less risk for a lender, which may allow them to offer you lower interest rates. However, I always remind customers that if you have great credit and steady income, a down payment as low as 3-5% can still be a financially sound option, allowing you to start investing and building equity sooner.

6) You have control over your rate too. You can “buy” a lower rate by paying a lender more up front in the form of prepaid interest called “points.” Or you can take lender “credits” to lower your closing costs, in exchange for a higher rate. (While buying a lower rate may seem appealing, keep in mind that depending on how soon you sell or refinance your home, it may not be worth the upfront expense.) 7) Of course, the final factor is the lender. Each lender is going to take all of these factors into account and determine the rates they will offer you. They also decide how much they will charge you in points or other lender fees to give you those rates. BE CAREFUL!! – this is where other lenders are known to bait and switch.

Finding the rate that works for you

Keep in mind that your Loan Estimate will include all closing costs, including an estimate of required third-party fees (like title, appraisal, recording fees, and taxes). These costs won’t impact your rate, but they may impact the size of your down payment since you’ll need to pay them upfront.

Land Buyers can also get loans when hunting for new real estate investment, so they also need to do their research on how to get the best rates available.

Of course, I am always here to help guide you. You can get on the phone with a Loan Consultant like me to talk through your options.

Getting Better prices

I have streamlined the mortgage process and eliminated a lot of unnecessary costs. So once you have your Loan Estimates from me, feel free to shop around.

I am so confident that I can get you the best terms that I have created this guarantee:  if I don’t beat a competitor’s offer by at least $1000, I will pay you $1000.

What have you got to lose??   NOTHING

What have you got to GAIN?  EVERYTHING (MONEY)!!



4 ways to land the very lowest interest rate

Time to refinance your mortgage?  Here are 4 ways to land the very lowest interest rate…


When mortgage rates are low, you can cut your monthly house payment by refinancing into a better interest rate.

If you can shave at least one-half of 1 percentage point off your current mortgage rate, it can be worth your while to trade in your existing home loan for a new one.

Here are some tips for getting the very best refinance rate.


Make sure you are paying your bills on time especially your mortgage in the months before you apply for your refi loan, so you’ll have the strongest possible credit score. The better your score, the lower your interest rate.

Don’t open or close any other credit accounts during this time, because that could lower your credit score.

Obtain your free annual credit reports from the three major credit bureaus (Equifax, Experian and TransUnion) to be certain there are no errors or old debts on your credit record that don’t belong there. Those can weigh down your credit score.

You can get a free credit report and credit score from myBankrate.

Paying off bigger chunks of credit card or other debt will help boost your score.

Lenders typically prefer that your total debt add up to less than 43 percent of your annual income. If you can reduce that debt-to-income ratio, you can land a lower interest rate.


If you have a 30-year mortgage that you’ve had for several years and refinance into another 30-year loan, you’ll drag out your mortgage debt and interest rate payments over a longer period unless you sell the house before the end of your term.

You could choose a shorter-term refinance, such as a 15- or 20-year mortgage, and enjoy a lower interest rate.

Throughout 2017, rates on 15-year fixed-rate mortgages have been about 80 basis points (0.8 of 1 percentage point) lower than rates on 30-year fixed-rate loans, according to Bankrate’s weekly survey.

But note that a shorter-term loan will come with a higher monthly payment.

You also might consider refinancing a fixed-rate loan into an adjustable-rate mortgage, or ARM. Those tend to come with lower interest rates, at least during the initial years before the rate starts “adjusting.”

If you think you may be staying in the home for the long haul, an ARM may not be the right choice for you.


Gather rate quotes, starting with the lender holding your current mortgage. That financial institution has an interest in keeping your business, so it might offer you an attractive refi rate.

Next, search lenders in your area, including smaller banks and credit unions. Sometimes, a lender that’s trying to expand in your market will offer a good deal on your rate, to win you over as a customer.

Expand your comparison-shopping to the largest lenders, plus online lenders.

Also, check lenders specializing in the type of property you own. Some lenders specialize in high-rise condos or beach communities and might offer you a better rate because they are more comfortable with your property.

Ask lenders about fees and closing costs, so you can determine whether your refi will really save you money.

“If all you ask is ‘What’s your rate?’ then chances are the mortgage banker will help you with one situation but may not get what’s best for you,” says Bill Banfield, an executive vice president at Quicken Loans.


Mortgage rates can fluctuate, so you have to get the timing right and know when to lock.

Rates on 30-year mortgages tend to follow the yield on the 10-year Treasury bond and are influenced by actions taken by the Federal Reserve to raise or lower rates. Work with a loan officer who understands how rates are behaving and can help you pounce after a news event has pushed rates down.

“When finding a lender, the three things most important things are: having trust, a commitment to service and communication,” says Kerry Wirth, chief operating officer of Waterstone Mortgage.

If it appears that the Fed is getting ready to hike rates, you may want to make your move quickly to beat the increase.



What the Federal Reserve rate hike means…

… your credit-card debt and savings


The decision to hike the key interest rate could impact your wallet sooner than you think

Bad news for people with credit-card debt: It’s about to get more expensive.

The Federal Reserve said Wednesday it is raising its benchmark federal funds rate by a quarter percentage point to between 1.25% and 1.5% — the fourth increase in a year.

In other words, the Fed announced an increase in how much banks will be charged to borrow money from Federal Reserve banks. (The Fed raises and lowers interest rates in an attempt to control inflation.)

“The third rate hike of the year and fifth in the past two years means that consumers with credit card debt and home equity lines of credit will be welcomed into 2018 with higher interest rates,” said Greg McBride, the chief financial analyst at the personal-finance website Bankrate.com. “And the signals are clear – there’s more to come in 2018.”

That increase will most likely eventually be passed on to consumers, Sean McQuay, a former credit card expert at the personal finance website NerdWallet, previously told MarketWatch. Many households with credit card debt — the average household carrying credit card debt has more than $15,600 — will likely take a hit.

Here’s how the latest Fed rate increase could impact your credit cards and bank accounts….

Credit cards

Because a rise in the federal funds rate means banks will likely pay more to borrow from the Federal Reserve, they may pass that cost on to consumers.

Credit card interest rates are variable (banks and credit card companies should state that their rates are variable in the literature customers receive to learn about their cards), and they are tied to the prime rate, an index a few percentage points above the federal funds rate. It is a benchmark that banks use to set home equity lines of credit and credit card rates; as federal funds rates rise, the prime rate does, too.

As a result, credit card holders are likely to see their interest rates rise, and that will happen soon, McBride said.

He predicted that could happen within about 60 days, or two statement cycles.

Some companies even raise their variable rates on the exact same day the Fed raises its rates, said Chris Mettler, the founder and president of CompareCards, a credit-card comparison website.

When the Fed raised the rate in 2015 — the first rate hike since 2006 — it only took about a month or two for the majority of banks that the personal finance website NerdWallet works with to change the variable APRs on their credit cards, McQuay said. They included both major banks and lesser-known ones.

What’s more: Banks are under no obligation to let their customers know they are raising their credit card rates when the Fed announces an interest-rate increase, so consumers should check on their own to find out if their rates are rising, McQuay said.

The average household now pays a total of about $900 in credit card interest per year, according to NerdWallet’s research. Now that the Federal Reserve increased its rates as analysts expected, the total will rise about $100, NerdWallet found. Although that amount won’t “break the bank,” McQuay said, consumers who have debt should expect this trend of rising interest rates to continue.

People who currently have credit card debt should consider trying to refinance or consolidate it now, or find a lower-interest rate card they can transfer their existing balances to, said Rachel Podnos, an attorney and financial planner based in Washington, D.C., told MarketWatch.

Many balance transfer cards have 0% introductory interest rates, McQuay said. Banks and credit card companies will likely keep those rates at 0% rather than raise them to slightly over 0%, because offering that 0% introductory rate is helpful for marketing. However, because the banks will be paying more to borrow, they may eventually shorten the introductory period if they are unable to afford that 0% for the long periods of time they offer now. As a result, securing one of these cards sooner rather than later would be a good idea.

Bank accounts

For savers, a rise in Federal Reserve interest rates is good news, Podnos said.

Savings account rates will likely increase slightly, which should help consumers, especially since interest rates on savings accounts are at historic lows. (Although consumers shouldn’t expect those rates to rise much, McBride said. One important caveat: Banks will likely have to collect extra income from borrowers before being able to pass those funds onto the savers, he said.)

Personal finance sites Bankrate.com and NerdWallet compile lists of the highest-yielding savings accounts. Online-only banks often offer accounts with higher yields than traditional banks do, as those lists show.

Online banks are more likely to pass those higher savings rates on to customers, and to do it quickly, McBride said, based on what Bankrate has previously found.

Consumers may be missing out on by using a low-yield savings account, a recent NerdWallet survey found. A savings account with one of the highest yields advertised (with a rate of 1.1%) pays $274 more per year than a low-interest account (0.01%) on savings of $25,000, it found.

“There is an arms race among the top-yielding online savings accounts, where there is a continual game of one-upmanship which will continue as the Fed raises rates further,” McBride said.

“For most banks it will be months before any improvement in savings returns is seen, and even then it will be inconsequential because their yields are so much lower. Don’t wait six months for your bank to raise their rate from 0.10% to 0.15% when you could be earning 1.3% now.”

That said, even the highest-yielding accounts currently don’t pay consumers enough to even offset the rate of inflation; so while consumers may want to put easily-accessible savings in a bank account, they should also make sure to diversify by investing instead of waiting for money to lose value, McQuay added.

He also suggested checking with credit unions, which sometimes have higher-yielding savings accounts than banks offer; they may even offer higher yields in person than they advertise online, he said.


6 Reasons to Refinance your Mortgage

If you’re a homeowner, you might be hearing everyone, from your neighbors to news anchors, talking about refinancing. So should you be considering it too? There are many situations in which refinancing your mortgage may be right for you — let’s go over some of the major reasons:

First of all, what is refinancing?

When you get cash-out refinance loans and refinance your mortgage, you are basically swapping out your old loan for a new one. There are two main types of home refinance loan:

  • Rate-and-term refinance – the remaining balance on your current mortgage is transformed into a new loan that has a different rate and/or term for your situation.
  • Cash-out refinance – You liquidate some of your home’s equity, creating a new loan that consists of your previous mortgage balance plus the cash you took out.

You can get a refinance from any mortgage lender you choose—it doesn’t have to be from your current lender. We encourage you to shop around when refinancing, just like you (hopefully) did when you first got your mortgage.

So why might you consider refinancing in the first place? It all depends on your goals. People choose to refinance for a diverse set of reasons, but here are some of the more common motivations I see:

  1. I want to lower my monthly payments.

If rates have dropped since you got your original mortgage, you may be able to refinance into a loan with a lower rate. Doing so can reduce the amount of interest you pay and lower your monthly payments, meaning you’ll also pay less over the life of your loan. You can check today’s rates in seconds here.

If rates haven’t dropped significantly but you have had or anticipate a decrease in income, you may be able to lengthen your loan term to pay off your loan more gradually. For example, if you switch from a 15-year fixed mortgage into a 30-year mortgage, you can make lower monthly payments, though it’s important to note that you’ll also have to pay interest for a longer period of time.

Lastly, has the value of your home gone up, or have you paid off a good chunk of your mortgage? With that additional equity in your home, your new loan-to-value ratio (LTV) will be smaller, which may help you get a better rate regardless of current rate trends. Or if you currently pay mortgage insurance, but now have more than 20% equity in your home, you may be able to refinance to cancel your mortgage insurance payments.

  1. My credit score has improved:

If your credit score has gotten a significant boost, you may also be able to refinance and get a better rate. For example, depending on the specifics of the loan, a 20-point increase in your credit score could reduce your rate and help you save thousands of dollars in interest over the life of the loan.

  1. The fixed period on my adjustable rate mortgage is ending:

While adjustable rate mortgages (ARMs) can save you money on your monthly mortgage payment in the early years of owning a home, once the fixed period ends, your interest rate may increase significantly. You can avoid this by switching from an ARM to a fixed-rate mortgage. While your new fixed rate will likely be higher than your original adjustable rate, you’ll be protected from future rate increases. (On the flipside, if you know you’ll be selling your house in the next few years, switching to an adjustable-rate mortgage could lower your rate and monthly payments until the fixed period ends and/or you sell your house.)

  1. I can afford higher monthly payments:

In some cases, changing the length of your loan when refinancing can be advantageous. If you can afford higher monthly payments, thanks to an increase in income, you could refinance into a shorter loan (such as from a 30-year fixed to a 15-year fixed) to pay off your mortgage faster, saving thousands of dollars in interest payments over the life of the loan.

  1. I want to take cash out:

As I mentioned earlier, you can also do a cash-out refinance, which allows you to use the equity you’ve built in your home to borrow money at a low cost. People often reinvest that cash out back into their home to make improvements that boost their home’s value. Taking cash out can also be useful if you need extra money for expenses such as education or medical costs and do not have access to other funds.

So how exactly does this work? Let’s say your house is worth $300,000 and you have $100,000 left on your current mortgage. That means you have $200,000 in home equity. You could refinance to turn $30,000 of this equity into cash out. You would get a new loan worth $130,000 (the $100,000 balance on your original mortgage balance plus the $30,000 you took out in cash).

Since lenders view cash-out refinances as riskier, interest rates are generally higher than those for rate-and-term refinances. However, you may still be able to get a better interest rate than your current financing even when taking cash out, particularly if rates have dropped or your credit score has improved since you got your original mortgage. To be eligible for a cash-out refinance, most lenders also require that your loan-to-value ratio (LTV) stays at or below 80% post-refinance (for a single-unit primary residence; maximum LTVs for other properties may vary). You can calculate your cash-out refinance LTV like so:

  1. I want to consolidate debt:

Lastly, you can refinance to consolidate other debts into a single, more affordable payment. This can be especially helpful if you have high-interest loans and debts like credit card debt, student loans, or a second mortgage. A debt consolidation refinance is technically considered a cash-out refinance, so the two work in a similar way. Essentially, a portion of your home equity is turned into cash out that you can use to pay off other loans and debts. Your old mortgage will be replaced by a new one that includes the amount you took out to pay those other debts.

Consolidating credit card debt in this way can especially be advantageous because of the difference in credit card and mortgage interest rates. In 2015, U.S. households paid an average interest rate of 13.66% on credit card debt, while the average mortgage interest rate for that year was almost 10% less, at 3.85%. By moving your credit card debt to your mortgage, you may be able to save a significant amount from the lower interest rate in the long term. Mortgage interest is also usually tax deductible, unlike credit card interest, offering another opportunity to save money by consolidating.

Since refinancing for debt consolidation is a form of cash-out refinance, you can expect to see higher rates than those for rate-and-term refinance, as well as a post-refinance maximum LTV of 80%, as I mentioned above. Note: while the interest rate might be lower, it may take longer to pay off that credit card debt when it is converted to mortgage debt and you should be sure to factor in closing costs when making your decision.

So what’s the verdict? Is refinancing right for you?

While there can be many benefits to refinancing, it’s important to remember that you’ll still have to complete a loan application and pay closing costs, similar to the ones you paid when you got your original mortgage. You’ll typically have to pay things like bank/lender fees, appraisal fees, and title insurance fees.

If you’re looking to get a better rate or term by refinancing, you should consider the break-even point: the length of time it will take for you to recoup the costs of refinancing. If you expect to remain in your current home beyond the break-even point, then it may be a good idea to refinance your mortgage. Otherwise, the upfront costs of refinancing won’t outweigh the potential long-term savings.

If you only plan to keep the home for a few more years, you may want to consider a “no-cost” refinance, where you offset your closing costs by raising your refinance rate (i.e. taking credits). Doing so can help you reduce your interest rate and monthly payment with no out-of-pocket costs. For a cash-out/debt consolidation refinance, you should also compare the benefit of how you’ll be using the money you take from your equity and the added time (and interest) it may take to pay off the loan.

Run the numbers

We have a handy refinance calculator that makes it easy to see your break-even point and how much you can save by refinancing. Once you create an account with us, you can also create your own Loan Estimates to see the breakdown of all the costs associated with your refinance depending on which point or credit options you are considering.

So long as your lender does not charge prepayment penalties or look for a “seasoning” period between your mortgages (establishing a certain time frame between appraisals), you can refinance as often and as soon as you would like. However, you should only refinance if it fits your personal financial situation and goals.

Review your options

I am more than happy to help walk you through your refinance options and find the right choice for you. You can call or text me (760-822-7062)  or email  me (rick@rickyells.com).


12 ways to get the lowest mortgage refinance rates

If you’re considering refinancing your mortgage, you are likely eager to find the lowest mortgage refinance rates.

But before you start shopping around for the lowest rates, experts say you should establish your objectives and prepare your finances to improve your chances of qualifying for the lowest interest rate.

“First, figure out the best loan product to meet your financial goals, and then you can start looking for the most competitive mortgage rates,” says Michael Jablonski, executive vice president and retail production manager for BB&T Mortgage in Wilson, North Carolina.

Here are 12 steps that will help lock in the lowest refinance rate possible:

No.1: Raise your credit score

“Typically, a credit score of 740 or higher puts borrowers in the best tier for a conventional loan program,” says Michael Smith, first vice president – business development manager for mortgage lending for California Bank and Trust in San Diego.

Most lenders require a minimum credit score of 620 to 640, but you’ll pay a higher mortgage rate for conventional loans unless your score is 740 or above. However, some portfolio lenders set their own guidelines.

No. 2: Lower your debt

Paying bills on time and paying down your credit card balance can reduce your debt-to-income ratio, or DTI, which improves your chances of qualifying for a low mortgage rate, says Jablonski.

A good rule of thumb is to make sure your debt-to-income ratio is no more than 36 percent, and even lower is better.

“Don’t buy a new car, make other major purchases or fill out multiple credit applications before you refinance, because all of those actions can hurt your credit profile,” says Smith.

Even if you have a high credit score, you may be denied a refinance altogether or subjected to higher interest rates if your DTI ratio is too high, says Jablonski.

No. 3: Increase your home equity

Remember that your credit scores and the loan-to-value ratio of your property could have a much bigger impact on your refinance rate than a slight shift in average mortgage rates, says Malcolm Hollensteiner, director of retail lending sales for TD Bank in Vienna, Virginia.

“Both a lower-than-average credit score and a high loan-to-value can lead to a more expensive interest rate,” he says.

No. 4: Organize your financial documentation

You should get your credit reports from all three bureaus to make sure there are no mistakes that need correcting before you apply for a refinance, says Smith.

A refinance application typically requires two years of tax returns with W2s, two recent pay stubs, and your two most recent bank and investment statements.

Gathering these materials ahead of time can expedite the loan process and prevent you from paying extra for an extension of your rate lock,” says Smith.

No. 5: Save cash for closing costs

Closing costs average about 2 percent of the loan amount.

“You can pay cash for the closing costs or, if you have enough equity, you can roll these costs into your new loan,” says Hollensteiner. “Another option that some lenders offer is to pay a higher interest rate for a lender credit to cover those costs.”

Shop smart for your refinance

Once your preparations are complete, you can begin to shop around for the refinance that works best for you.

No. 6: Start online

Deborah Ames Naylor, executive vice president of Pentagon Federal Credit Union in Alexandria, Virginia, recommends starting online with a refinance calculator that estimates your monthly payments at various loan terms.

“A shorter term loan will have a lower interest rate than a 30-year fixed-rate loan, but the payment will be higher because you’re paying it off faster,” says Naylor. “It’s important to decide what payment you’re comfortable making before you see a lender, because that payment could be much less than the payment you qualify for.”

No. 7: Decide on a loan term

Barry Habib, founder and CEO of MBS Highway in New York City, says the loan term you choose needs to be made in the context of your other financial obligations and plans.

“If you have $30,000 in credit card debt and no savings for college, you may want to go for a 30-year loan to keep the payments as low as possible,” says Habib. “Someone else may want a shorter term to build equity faster while another borrower might want a longer loan so they can keep their tax deduction as long as possible.”

No. 8: Talk to multiple lenders

Once you’ve decided on your loan term ,it’s time to research loan products available from a credit union, a regional or community bank, a direct lender and a national bank to find out what special programs they offer, says Naylor.

“Many lenders offer ‘portfolio loans,’ ones they keep in-house instead of selling on the secondary market,” she says. “They can be more flexible with those loans and offer special promotions.”

Instead of choosing a lender solely based on current mortgage rates, Russ Anderson, senior vice president and a centralized sales executive with Bank of America in Los Angeles, says you need to find a lender you can trust. “People get too wrapped up in the rate rather than finding someone who will communicate with them,” he says. “You need to find someone you trust, who will be engaged in your family’s financial situation.”

No. 9: Review all your loan options

Lenders can discuss various loan products when you interview them.

“There’s a broad product mix of conventional financing, government-backed programs like FHA loans and special refinancing programs through the Making Home Affordable program,” says Anderson. “A good lender can present the pros and cons of each of these programs in the context of your individual finances.”

No. 10: Decide how you will finance your refinance

You’ll also need to decide how to pay for your refinance. Closing costs and lender fees can be paid at closing, wrapped into your loan balance or you can opt for a “no-cost” refinance.

“A no-cost refinance means that your lender will pay the fees and you’ll pay a slightly higher interest rate of one-eighth to one-fourth percent,” says Habib.

We’ve been asked thousands of times: “Is it better to pay closing costs out of pocket, finance them into the loan amount, or trade them for a higher interest rate?” There’s no one simple answer, since each refinance choice has its own benefits and total costs over time. One may be more or less expensive depending upon how long you’ll hold onto the mortgage. Our unique calculator allows you to run the numbers for a Traditional Refinance, a Low-Cash-Out Refinance and a No-Cost Refinance so you can determine which is best for you. Fill in the information once and instantly compare the costs and savings.

No. 11: Compare mortgage rates and fees

Advertised mortgage rates are sometimes based on paying points, so you need to make sure you compare loans with zero points or the same number of points.

“It’s important to shop for the same loan on the same day to get a true comparison of mortgage rates, because mortgage rates change every day,” says Smith. “You need to explain to each loan officer all the criteria for your refinance, not just ask ‘what’s today’s rate on a $200,000 loan?’ You should also ask about loan processing times.”

Shopping by APR can be confusing, since different lender fees and policies can affect the outcome. It is possible for two loans to have identical rates and fees and different APRs. Conversely, two loans could have the same APR but different interest rates. Because of this, it is usually better for you to focus instead on the two most important components of APR: interest rate and fees.

The most important component of your refinance will generally be the interest rate, so you’ll of course want to pay attention to that. Fees and closing costs matter, but whether you want or need to pay them will depend upon your situation. There are times when paying costs to obtain the lowest mortgage refinance rates can make sense and times when it does not.

No. 12: Know when to lock-in your rate

Once you’ve finalized your loan decision you should consult your lender about when to lock-in your rate.

“Processing times for different lenders can range from 30 to 45 days to more than 90 days,” says Smith. “Typically, lenders will do a 30- or 45-day rate lock, so you should be consulting with your lender to determine the appropriate day to lock your loan. If you have to extend the lock or re-lock your loan, that will likely cost you more money.”

While shopping around for a refinance may take a little longer than refinancing with your current lender, the rewards can last as long as your loan.