Tips for refinancing your home

November 20, 2011 

Dear Dave,

We're thinking about refinancing our home, and will be talking to a loan officer next week. What kinds of things do I need to know so we can protect ourselves in the deal?

- John

Dear John,

It's not really a big deal. You'll get a Truth in Lending Sheet and an Estimated Settlement Sheet. You might want a little more detail, so ask them to give you a sample settlement sheet based on the size of your loan.

Watch out for points and origination fees. These are nothing but pre-paid interest. You might get a little lower interest rate if you pay them, but the break-even point is between seven and 12 years to get your money back. Since the average mortgage is refinanced every 5.6 years, paying points and origination fees is not a good deal.

And don't worry if the loan officer tells you this isn't normal. They can make just as much money from the sale. They'll just have to work a little harder to do it.

- Dave

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