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.
If you want to make sure the interest rate your lender offers you is the rate you get when you close the loan, ask about a mortgage lock-in (also called a rate lock or rate commitment). Any lock-in promise should be in writing. Make sure your lender explains any costs or obligations before you sign.
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.
Refinancing is not the only way to decrease the term of your mortgage. By paying a little extra on principal each month, you will pay off the loan sooner and reduce the term of your loan. For example, adding $50 each month to your principal payment on the 30-year loan above reduces the term by 3 years and saves you more than $27,000 in interest costs.
Get your interest rate and closing costs in writing as soon as you decide on a lender to work with. Get your lender to give you a commitment in advance of all of the costs that will be involved with your loan. Find out if the refinance loan you are getting has a pre-payment penalty as well. Sometimes lenders will leave out important information like this, if they think it might scare you away from refinancing with them.
