Refinancing FAQ

Q. Should I try to pay as many discount points as possible to lower my
loan's interest rate?

A.If you plan on staying in the property for at
least a few years, paying discount points to lower the loan's interest
rate can be a good way to lower your required monthly loan payment (and
possibly increase the loan amount that you can afford to borrow). If you
only plan to stay in the property for a year or two, your monthly savings
may not be enough to recoup the cost of the discount points that you paid
up-front. Ask your lender how long it would take for your monthly savings
to recoup the costs of the discount points.

Q. What does it mean to lock the interest rate on a mortgage
loan?

A. Due to the nature of interest rate movements,
mortgage rates can change dramatically from the day you apply for a
mortgage loan to the day you close the transaction. If interest rates rise
sharply during the application process, it could make a borrower's
mortgage payment larger than he/she previously thought. To protect against
this uncertainty, a lender can allow the borrower to 'lock-in' the loan's
interest rate, guaranteeing the borrower the prevailing loan rate for a
specified period of time (often 30-60 days). A lender may or may not
charge a fee for this service.

Q. Should I lock-in my loan rate when I apply for a mortgage loan?

A. No one knows for sure how interest rates will
move at any given time, but your lender may be able to give you an
estimate of where it thinks mortgage rates are headed. If interest rates
are expected to be volatile in the near future, you may want to consider
locking your interest rate if rising rates will no longer allow you to
qualify for the loan. If your budget can handle a higher loan payment or
if the lenders lock fee seems excessive for your means, you might want to
consider allowing the interest rate to 'float' until the loan
closing.

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