There is a refinancing myth that says you should not refinance your mortgage unless your interest rate will be at least two points less. This myth is not necessarily true if there are other benefits to the refinance or other reasons behind it.
Refinancing a mortgage means the owners are paying off their existing mortgage and replacing that mortgage with a new loan. Generally, the costs associated with mortgage refinancing are rolled into the loan, meaning they are added to the existing balance, increasing the loan amount.
If there is a big difference between the initial interest rate and the APR listed in the ad, it may mean that there are high fees associated with the loan.
Ask the lender or broker for a comparison of the up-front costs, principal, rate, and payments with and without this rate trade-off.
Many companies in this industry will do what ever they can to get away with charging you as much as they possibly can. Some of the ways they do this is not disclosing all the third party fees involved in a loan such as title insurance, appraisals, pre-paid tax and insurance escrows etc. It is important that you ask the loan officer you're speaking with about third party fees. If you don't they may not tell you and give you a good faith estimate that sounds fair, but at closing you'll find out that you have to pay a couple of thousand dollars more in fees you were unaware of. A good loan officer at a reputable company should have no problem disclosing all fees that pertain to your loan and should also make sure you understand what the fees are for.
