If you have a mortgage, you’re probably getting offers in your mailbox to refinance it.
Refinance your mortgage and take cash out, these offers say. Home prices are rising, so you’ve got a ton of equity in your house. Did we mention you can take cash out? Cash cash cash!
A nice pile of cash sure sounds tempting, doesn’t it? But hold up — before you do anything with your mortgage, consider two important steps to save yourself a lot of money and aggravation.
What to Do Before Refinancing Your Mortgage
If you’re like most of us, your home is your most expensive possession, and your mortgage is your biggest monthly expense. Refinancing it is a big deal. To avoid being misled, manipulated or ripped off, here are a couple of steps to take before signing up with a new lender.
1. Talk to Your Current Mortgage Loan Servicer
Not nearly enough homeowners do this, says Tim Allen, a veteran mortgage banker, and founder and CEO of aboutMYmortgage, which he co-founded with Florida attorney Edward Wollman and veteran mortgage marketing professional Mauro Appezzato.
Here’s the thing: You might be getting all these sweet-sounding refinancing offers in your mailbox, but you’re probably not getting a refinancing pitch from the company that you make your payments to right now.
They’re not reaching out to you to replace your loan — because they already have your loan.
Most homeowners looking to refinance will shop around for a new lender, and they never even think of talking to their current mortgage loan servicer, Allen says.
But it’s worth your time to talk to your current mortgage loan servicer. It may be able to refinance your mortgage at a considerable savings compared with what you’d get switching to a new lender. And because the current mortgage loan servicer already has your loan information, refinancing this way can be quicker, easier and cheaper.
2. Figure out Whether Refinancing Is Your Best Move
“A mortgage loan originator only gets paid a commission if he convinces you to refinance — not if he tells you to get a home equity loan,” says Allen.
Refinancing means paying off your existing mortgage and replacing it with a new one. Why do that? Maybe you get a lower interest rate, shorten the term of your loan or tap into your home’s equity to get a large sum of money.
However, mortgage interest rates are climbing. If you have a low interest rate already, a new home loan could actually mean a higher interest rate for you.
If you’re looking to cash in on the rising value of your home, for example, it might be smarter to take out a home equity loan. This second mortgage allows you to borrow against your home’s value.
Crunch the numbers first to figure out what’s best for you.
But that’s not the advice you’re going to hear from someone whose job is to sell you a whole new mortgage.
“Be careful of ulterior motives when you’re getting advice,” said Allen. “If you go to a mortgage office, they’re not going to tell you about home equity loans.”
An Easy Way to Connect With Your Mortgage Loan Servicer
The entrepreneurs behind aboutMYMortgage are trying to look into both of these points for you at once: Can you work with your current lender, and is refinancing even right for you?
Instead of foisting you off on an aggressive loan salesman, they’ll hook you up with a customer care specialist at your existing mortgage loan servicer. That person will be able to give you useful information about your existing mortgage and all of your options — refinancing, a home equity loan or line of credit, or a mortgage modification.
“It may seem like it’s an obvious thing to do,” says Allen, “but this is something that’s never been done before.”
Here’s how it works:
1. Choose Your Mortgage Servicer
When you visit aboutMYmortgage you’ll be asked to type in the name of your mortgage servicer. This is the company that currently holds your mortgage. (It’s who you make your payments to.)
Allen says the company has been signing agreements to partner with some of the biggest mortgage servicers in the U.S.
If aboutMYmortgage is not partnering with your mortgage loan servicer yet, you can ask the company to let you know when they are, or James B. Nutter & Co. will assist you with your loans.
It’s also partnering with Spring EQ, a home equity loan provider that does business nationwide.
2. Choose Your Request
Next you’ll choose a subject you want to talk to your mortgage loan servicer about. Among the options you’ll receive are:
- Home equity loans.
- Mortgage modifications.
- The pros and cons of a new loan.
- Eliminating your private mortgage insurance.
The website will send your request to the appropriate contact. Then you’ll get a call from someone with your mortgage servicer who’s prepared to answer your questions and help you with your situation.
“Our whole deal is empowering homeowners,” says Allen. “That’s our mission.”
The company doesn’t make any money from consumers like you. Instead, it makes its money from mortgage loan servicers who pay the company to help with customer retention. In other words, your current mortgage holder will pay the company a commission for referring your business back to them instead of to a competing lender.
The company currently does business in 29 states and Washington, D.C. and continues to expand.
To Refinance or Not?
Sometimes refinancing your mortgage makes financial sense.
But in other cases, starting over with a brand new loan just means paying more or pushing back the day when you can pay off your mortgage for good. The goal of aboutMYmortgage is to help you avoid that mistake.
“What’s missing now is that you don’t have somebody who’s actually giving you a consultation,” says Allen. “You don’t have that when you’re talking to a loan originator, although you think you do.”
Mike Brassfield (firstname.lastname@example.org) is a senior writer at The Penny Hoarder. He could use a mortgage modification.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
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