If you plan on moving out of your existing home within the next few years, it may not be beneficial for you to refinance. Make sure you let your mortgage specialist know your future plans.
Don't escrow taxes and insurance. Unless you're undisciplined, avoid putting monies in escrow to cover your property taxes and homeowner's insurance. There's usually a fee for this privilege that runs under 1 percent of the loan amount, in states where it's allowed. "Paying the fee will allow you to time your tax and insurance payments to your benefit," says Bank South's Steve Austin. For instance, you may be able to prepay taxes that are due next year and use those payments to reduce your current tax bill. Moreover, you get to hang onto your money longer. That may be an advantage when interest-bearing accounts start paying more.
You can ask for a copy of your settlement cost papers (the HUD-1 form) one day in advance of your loan closing. This will give you a chance to review the documents and verify the terms.
If you have a mortgage, you should keep an eye on rates-especially if you have an adjustable rate mortgage. Getting locked in at a lower, fixed rate can save you hundreds, possibly even thousands, of dollars over the life of your loan.
Calculate the financial benefit of refinancing in one, two, or three years. Does the benefit compare with your plans for staying in your home?
