MORE BANG FOR YOUR BUCK: Comparing mortgage refinancing

Published: Jul. 11, 2013 at 9:12 PM EDT|Updated: Jul. 11, 2013 at 9:15 PM EDT
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RICHMOND, VA (WWBT) - The average 30-year mortgage rate rose to its highest level in nearly two years this week.

One expert believes, because of the strengthened employment data released last week, bond and mortgage markets are once again on the defense. So far, the biggest impact on the mortgage market is fewer existing homeowners refinancing their loans.

Refinance share of mortgage applications dropped 11 percent this week.

How can you get the best refinancing offer possible? One important detail could save you thousands.

After 23 years, my heating and air conditioning unit finally died. I had to replace the whole system.

The price tag? Almost $8,000.

I don't have that kind of money lying around, so I'm turning to my home's equity to pay for it. I owe $160,000 and I want to pull out $10,000, so I went to bank after bank after bank to see what different lenders offer.

I have 21 years left on the current mortgage, with a rate of 4.875%. It makes sense to refinance to a shorter 15-year loan - a new 30-year will cost far more in the long run. I've got a stellar credit score, so I should be offered pretty good rates.

My current lender, Bank of America, offered a 15-year fixed rate at 3.5%. So did Union First Market.

Three smaller banks did even better. Argent, Eastern Virginia Bank and Village Bank all quoted 3.25%.

The most impressive rate came from the Virginia Credit Union. I could refinance my loan for 2.75%, but there's a catch...

"What people don't look at, sometimes are what the costs are," said Dan Dougherty, President of Colonial First Mortgage.

That 2.75% rate will cost me 3-5% of my loan. That's $5000 to $8000 in closing costs. The other banks wanted anywhere from $2000 to $4000 for closing.

Mortgage brokers can get low rates with fewer fees. Dougherty has a relationship with 16 lenders. His guaranteed higher volumes dictate better credit terms, and it's the lender who pays him, not you.

"They are going to pay me x amount of the loan amount, and I get to charge you zero. No processing, no application fee," said Dougherty.

Dougherty quoted a rate of 3.25% and a credit of $3300 dollars. This refi would only cost $50.

Dougherty says get everything in writing. If a lender quotes you one price and its ends up being more in the end, state law allows you three days to cancel the entire deal with no strings attached.

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