MORTGAGE refinance in the state of Nebraska can be obtained from one of the several mortgage lenders or through mortgage brokers registered to operate in the state. However, you should be aware of potential pitfalls in the process of seeking mortgage refinance to ensure that you get the refinance on terms most suitable to your needs.
Do you need it
To begin with, you should be sure that a refinance is good for you. It need not always be good for everyone. But since mortgage is a very competitive market in Nebraska, you might receive competitive offers from different lenders / brokers, and all offers look attractive. In such a situation, you might end up making a wrong choice if you are not aware of certain basics. Let us therefore look at the basics that will enable you to make the right choice.
First and foremost, decide why you want mortgage refinance. Is it because interest rates have fallen from the time you took your original mortgage? Is it because you want lower your monthly payments even if that means prolonging the duration of your mortgage loan? Or is it because you are now in a better financial situation than before and therefore want to pay off your mortgage sooner than you had earlier planned, even if that means increasing your monthly payments or paying a lump sum to reduce the outstanding principal? Or it could be that you want a lump sum of cash to meet with an urgent need? These are just some of the many reasons for one to seek mortgage refinance. No single reason is applicable to all.
Importance of APR
One important thing to remember is that low interest rates are not necessarily the best reason to opt for mortgage refinance. There is something called ‘annual percentage rate’ (APR), which decides the actual cost of your refinance loan on an annualized basis. Often, it so happens that the advantage of low interest rates is wiped out when you take APR into account. Why?
The problem with interest rates alone is that they are part of the story; they are not the complete story. When you opt for mortgage refinance, you are actually closing your existing mortgage loan account and starting a new one. There is a cost to be paid to the original lender for premature termination of the loan agreement.
In addition, you also have to take into account the fees and charges you have to pay upfront for the refinance loan. These include: property valuation fee, broker’s commission, ‘points’ (i.e., initial lump sum payment to reduce the effective interest rate; one point equals one per cent of the loan amount), and other charges. Add all this up to the interest rate, and the resultant payment is what APR is. Therefore, let your APR be the criterion for deciding whether a mortgage refinance makes sense to you.
Of course, according to the federal Truth in Lending law, the lender / broker is bound to unambiguously inform you of the APR of your loan and it would be clearly stated in the documentation of your loan. But if you are unaware of it from the first stage of your negotiation, you may be taken by surprise when you learn of it. That’s why you should ask your lender / broker of all costs of a mortgage refinance loan, not just the interest rate.
Use of online calculators
To put yourself on a surer footing, it is advisable to independently check out the different offers you are entitled to, before you approach a lender / broker. You can do this by using the online calculators provided on the websites of many lenders / brokers, such as www.mortgageloan.com, www.erate.com, www.bankrate.com and so on. These calculators provide you with an approximate idea of what is in store for you in the mortgage refinance market. It’s easy to use these calculators: you simply feed into it the information it asks you about yourself (e.g., your credit profile), your property (e.g., its type and exact location in Nebraska), and your loan requirements (such as the type of loan you prefer, the amount of loan you need, etc.). Once you get an initial idea of the different offers to which you may be entitled, you can negotiate with lenders / brokers better.
Nebraska has a competitive market for mortgage loans and mortgage refinance. In the heat of competition, market players want to sell you a loan since it is their business to do so. However, it would not be prudent to leave your decision-making to the lenders / brokers. You know what is best for you and, therefore, you are the decision-maker. The lender / broker are only there to assist you in arriving at your decision, and there are free online calculators too to help you.