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Streamline your mortgage refinance

Question: The interest rate on my home mortgage is above 11 percent, so I think I should refinance? But I looked into getting a new mortgage from several local lenders, and I learned they want to charge me for a new appraisal (my loan is only about 3 years old), new title insurance and new loan fees. Is there any way I can save on these costs of refinancing? _ Hugo R.

Answer: Yes. Most major mortgage lenders, such as VA, FHA, Fannie Mae, and Freddie Mac now have special "streamlined" refinancing programs. Your first step is to contact your current loan servicer to find out who now owns your mortgage. Incidentally, every borrower should ask this question just in case the loan servicer is doing a poor job. Then you can contact the owner of the mortgage directly to report bad loan servicing, a common occurrence.

The second step, after you find out who owns your mortgage, is to inquire of the loan servicer about a streamline refinanced mortgage. If you have a good loan payment record with no late charges in the last year, most lenders offer streamline programs consisting of a new loan application, income verification, minimal credit report and no new appraisal unless your home has declined in market value.

The third step, after your refinanced mortgage has been approved by the loan servicer, is to arrange for lender title insurance. You do not need a new owner's title insurance policy. Your best bet is to go back to the same title company that insured your title last time. Ask if they have a special program with a low rate for mortgage refinancing. If not, shop around to see if another title insurer has a lower rate.

Many smart loan servicers are now actively soliciting their high interest fixed rate current borrowers to refinance now. They realize if they don't, most of these borrowers will refinance elsewhere. For example, I have a friend whose VA lender offered to refinance for just a one-point loan fee. He reduced his interest rate by 2 percent with minimal paperwork and fees.

Commissions

Question: Our home has been listed for sale since last October. It has been shown many times by our listing agent and by other local agents. But we have not yet received any written offers. Our agent, who won an award last year for high sales from the local Board of Realtors, says we should raise our commission rate to 8 percent, so agents will have more incentive to show and sell our home. This seems outrageously high to me. What do you think? Is this illegal bribery? _ Sarah W.

Answer: Offering a higher than customary real estate sales commission is not illegal bribery. But it can be smart business. If you can sell your home this month instead of several months from now, you save mortgage and property tax payments that may be greater than the amount of the increased sales commission.

In the current buyer's market, you want your home to stand out from the crowd of hundreds of other homes listed for sale. One of the best ways to get the attention of local agents is to offer them a higher than normal sales commission. The result should be more showings and eventually a purchase offer. However, before you do this be sure your home is correctly priced based on recent comparable home sales prices.

Auctions

Question: I respectfully disagree with your recent disparaging comments about home auctions. Our home languished unsold on the market for almost six months. Shortly after our listing expired, a young salesman contacted us about auctioning our home. He gave us an impressive sales talk about how he sold other homes at auctions. The key to success, he said, is offering easy financing. We agreed to finance a sale at 9 percent interest if the buyer made at least a 20 percent cash down payment. A local S&L appraised the house and agreed to finance the sale on an adjustable rate mortgage if the top bidder preferred an ARM. The agent advertised the auction for two weeks before the sale, and there were several inspection times. At the Sunday afternoon auction about 20 people showed up. They had been pre-qualified by the auctioneer, who ran a credit and income check on them. However, only four or five actively bid. Our house sold for about 18 percent below our original asking price, and that was satisfactory to us. The buyers took the adjustable rate mortgage, so we cashed out. _ Ginger S.

Answer: Thank you for sharing your auction success story. Your auctioneer knew how to conduct successful single-family home sales. Few cities have such auctioneers who will auction one house at a time, especially when the sales price is not very high. We appreciate learning what Paul Harvey calls "The rest of the story" about home auctions.

Robert J. Bruss is a nationally syndicated columnist on real estate. Write to him in care of At Home, St. Petersburg Times, P.O. Box 1121, St. Petersburg, Fla. 33731.

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