When shopping for mortgage refinancing, a second mortgage, a home equity line of credit, or home equity loan, interest rates are of critical concern. However, in order to ensure you are getting a good loan and a good interest rate always ask your lender for a Good Faith Estimate.

Having Faith in Refinancing
A Good Faith Estimate should be provided for any mortgage loan you apply for whether it is a new home loan or a refinance (link to refinance form), a home equity loan, or a second mortgage. Your good faith estimate will show you exactly what you are paying for.

For example, if one lender quotes you 6% interest for your cash-out refinance and another lender quotes you 6.5% interest to refinance, the question becomes are you paying for the lower interest rate? Lenders will often allow you to 'buy down' the interest rates for points which are usually 1% of the loan amount. If you are refinancing and have a loan balance of $500,000 at 6.5%, your principle and interest payment is $3,160; if you decide to refinance at 6% interest by paying a point ($5,000) your mortgage payment is $2,998 a month??a savings of $62 per month. To pay for the point you paid when you refinanced, you would need to keep the mortgage for almost seven years before it paid for itself.

Your good faith estimate will also tell you what types of lender fees and outside fees you are paying for your refinance or second mortgage loan. Your title, escrow, and appraisal fees should be fairly comparable; however, lender fees can vary. To ensure you are getting the best deal when looking at home mortgage refinancing, home equity loans, or home equity lines of credit, look at more than just the interest rate. Ask for a good faith estimate to see what you are really paying for that refinance.