Choosing the proper mortgage is a huge decision, but if you’re refinancing then choosing the right refinancing lender can be just as important of a decision. Here are 4 things you should think about when choosing a refinancing lender.

Know why you want to refinance

There are several reasons to consider refinancing your mortgage and each presents a different picture to a refinancing lender. Here are four of the most common reasons people have for refinancing:

  1. You want to lower your current interest rate. This can be profitable if the current rates are at least 2% lower than the rate on your mortgage.
  2. You want to switch from an adjustable rate mortgage to a fixed rate mortgage. If you see interest rates beginning to rise this can be a very smart move.
  3. You want to shorten the term (length) of your mortgage. This will help you build equity in your home faster and will also have you pay off the mortgage sooner meaning you own your home free and clear.
  4. You want to cash out some of the equity in your home. If you’re planning on using the excess cash to do home improvements or to start a business this can be a wise decision.

The refinancing lender will want to know your reasons for choosing to refinance. They will tailor your mortgage product to your needs based on your reasons for refinancing. You should also know about the current terms of your mortgage and should know what your credit score is.

Know what mortgage products and refinancing lenders are available

Similar to getting a new mortgage, there are a variety of lenders that you can work with to refinance your home. Mortgage companies, banks and credit unions are the obvious top choices when refinancing. You can also work with a mortgage broker who will do the work of contacting a variety of lenders on your behalf. Keep in mind that mortgage brokers are not bound to find the best deal for you unless that is specified in a contract. They may very well have their own interests at heart when directing you to a refinancing package.

Also, take the time to either learn or re-learn about mortgage and lending vocabulary. Be familiar with terms such as points, prepayment penalties and interest rates. You can also find current listings of mortgage rates from a variety of websites, such as Bankrate.com, and should take the time to become familiar with current interest rates and trends.

Shop several refinancing lenders before deciding

The mortgage refinancing arena is very competitive these days and finding a handful of lenders to compare should be an easy task. Using a broker makes this even easier, but again make sure they are contractually obligated to present you with the best offer for you. You can find resources in your local newspaper and yellow pages as well. If you’re comfortable using the internet then this is a wonderful place to research refinancing lenders. There are many online lenders who will provide you with quick quotes and great customer service.

Negotiate the best terms for your refinancing

Typically the mortgage company is paid based on the loan that you take through them and this is especially true in the case of mortgage brokers. Make sure that the loan is to your best advantage before signing on the dotted line.

You can also save money by searching for a lender who will offer you refinancing with no closing costs. Make sure if you are comparing loans that you are comparing similar loans to get a good idea of which one is best. Make sure all proposals are sent to you in writing and don’t let a refinancing lender rush you to a decision.

To compare the loans you could do something like a spreadsheet with columns for each important feature such as interest rate, points, prepayment penalties and closing costs for example. This makes it easier to see the differences in each loan offer. Also be sure to check online for the latest mortgage rates.

As I’m sure you know, refinancing your mortgage is a huge decision and should be taken very seriously. Know as much as you can about your refinancing options and the refinancing lenders that you’ll be working with. This will help you to make the best decision possible. By following these tips you will be able to get the best deal and finding the proper refinancing lender and mortgage package for yourself will be much easier.