Mortgage rates are reaching new lows in late February. Many people are asking whether they should refinance. The answer is… Maybe. At least that is the initial answer on the way to the ultimate yes or no answer. And the only way to get that ultimate answer is by endeavoring to find out. Not to sound trite, but it is the truth.

Let me just say that despite the bombardment with offers from all sorts of banks and mortgage companies with offers to refinance – that I usually ignore – I would have to say that now is one of the best times in a long time to check it out. Even though I refinanced only 2 and a half years ago, my mortgage company keeps sending me offer notices. I have called them twice, only to find out that they cannot beat the deal I already have…

Be wary of simply getting a better base rate. That does not always mean a better deal. If you end up having to pay origination fees or closing costs, those end up getting financed as well. So, you might end up with a lower APR, but you could end up with a higher effective interest rate. One simple little trick I do is this… I add up all the payments I would have to make between now and my payoff date for my current loan, and compare it to the sum of every single dime I would have to pay between now and the would-be new payoff date. Then I ask, “which is less?”

Many sales people for loans (you might also call them loan officers, among other things), like to sort of trick the borrower by asking, “what do you want your monthly payments to be”, or “how long do you want your loan term to be”. Then they proceed to meet your single-specified criteria while at the same time putting together the highest cost loan package they can get away with in order to get the biggest commission they possibly can. Car salesmen are among the worst in this. Many times my blood was sent to boiling when the salesman ignored my clearly-stated criteria of “best rate with lowest absolute payout over the life of the loan”, and instead kept asking how much I wanted my monthly payments to be. Yes, he would love to jack up the interest rate and extend the loan term and get a financing bonus in addition to his sales commission.

All I am saying is, be informed. Be armed with information to protect yourself, and don’t worry about hurting a mortgage officer’s or a car salesman’s feelings by seeking to get the best deal for yourself. Take advantage of some of the free financial calculators here at LoanQuotes.com. And don’t be discouraged by my words of caution. There are lots of good and reputable lenders out there. In fact, we’d like to introduce you to some ourselves right here.

Happy financing!

Stephen Dunbar