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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

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Low cost mortgage loans

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email

Q: How do you refinance your home mortgage without adding more to your original mortgage loan? What mortgage company offers the best deals?

A: You probably mean 'how do you refinance without adding the additional cost of refinancing to the original mortgage loan?'. There is nothing wrong with adding more to your original loan if this is part of larger financial plan to reduce taxes, make additional investment, improve cash flow, raise credit score, etc. This can be one of the most effective financial planning tools available in an inflationary real estate market. But the important point is to keep your overall cost of borrowing low. Cost of borrowing is the interest rate plus the application costs and settlement charges. It makes no sense to select a loan with a slightly lower interest rate if the settlement costs are several thousand dollars. Homeowners tend to refinance more frequently now, so there is less time to 'recoup' loan closing costs. Many home equity loans offered directly by banks have no application costs or settlement charges so if you can pay off a mortgage loan with a home equity loan, this is often the best choice. Unfortunately, home equity loans are not an option for all borrowers. If you must use a fully underwritten mortgage loan due to higher loan amount, lower credit score or your property has a high 'loan to value ratio' then select one that has no commissions or "points" paid to a broker. Low cost no-load mortgages are available through fee-based accountants and advisers. These loans cost about $2,500 less than a traditional brokered mortgage loan. The lenders generally want a letter of recommendation from the accountant saying that the accountant reviewed your financial statements, etc. OnlineAdviser offers this search and introduction service for a flat fee of $150. One final note: remember that the higher your credit score the more options you have. If your credit score is less than 640, then you may be at the mercy of the high commissioned brokers. Almost half of us have inaccurately reported credit information that lowers our credit score. For this reason, it makes sense to check and correct your credit score months before applying for a mortgage loan.


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