How to Compare Refinance Quotes
- 1). Check the fees the financial institution charges you for the application. Just to apply for the loan may cost a fee with no guarantee you will get the loan. Only apply to financial institutions that offer a free application or waive the fee if they do not approve you.
- 2). Look at the closing costs for the refinance quote. Closing costs are just one of the factors to consider so it is not always prudent to take the loan with the lowest closing costs without considering all the other factors.
- 3). Compare the interest rates of the various loans. Most of the time, a lower rate is better unless it is a variable rate. Since variable rates may go up over time this type of loan could wind up costing you much more that a fixed interest rate that started higher.
- 4). Find out the term of the refinance quote. You may have options to refinance for 15, 20 or 30 years (or other terms) and you must compare like options. For example, if you compare the payment on a 20-year term to a payment on a 30-year term you will not come up with a true comparison since the terms are not the same. Use a mortgage calculator to convert terms to the same length, and then compare the payments (see link in Resources).
- 5). Choose a refinance quote that does not contain a prepayment penalty. If you decide to pay the loan off early, you do not want to pay an extra fee to do this. Alternatively, this may still be the best refinance quote if the prepayment penalty is low. You must weigh all the factors before deciding which refinance offer is best.
- 6). Select a refinance quote to compare that contains a variable interest rate. Find out if the rate is capped and at what amount. Capping a rate means that the interest rate may only go up a certain point or percentage amount. Once the interest reaches that rate, the loan rate cannot go any higher. Sometimes, a variable rate can be the best refinance quote if the rate is low enough with a cap in place.
- 7). Put all these factors together to compare refinance quotes. Once you have all of the numbers in front of you, it should be easy to choose the refinance loan with the best terms for you.
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