Three Tips for Refinancing Online
(Updated February 2015)
As interest rates rise, so too does the number of adjustable-rate mortgage holders who are turning to mortgage refinancing as an escape from the insecurity of ever-changing rates. If you choose to shop for a mortgage refinance on the Internet, it's important to take necessary safeguards to ensure a smooth process.
For homeowners with an adjustable-rate mortgage (ARM) , it often seems like a rollercoaster ride. Rates are going up, down, and all around. Unfortunately, paying your monthly mortgage bill is no day at an amusement park. In order to meet the challenges of adjustable-rate mortgages, homeowners are turning to the option of refinancing. They're also turning to the Internet as a means of facilitating the process.
The Internet has become a major source of information on almost any topic. Mortgage refinancing is no exception to this phenomenon. While the web can be safe and a great resource, it's important that you take necessary precautions when utilizing it to refinance your mortgage.
Reputation is key
The first piece of advice is to use a reputable lender. Ask friends and family which companies they've used for their mortgage financing needs, and what their experiences were. Look around your community for reputable lenders that have been in business for many years. Using a company that you've never heard of can lead to problems because you don't know what their track record is or how they do business with customers.
Don't let the fact that a lender is doing business online in itself be a deterrent to you. These days, virtually every bank and mortgage lender is set up to not only allow you to shop for mortgages online, but also to apply, submit your documentation and in some cases, even close the loan without ever meeting anyone face-to-face. It's increasingly how lending and other types of business are done in this day and age.
In fact, many lenders will not even have a "brick and mortar" presence - an actual office - in your state. Some may not have any retail outlets at all, but do their entire mortgage lending business online, relying on local attorneys or title agencies to handle any in-person transactions that may need to be performed. As long as they're licensed to do business in your state, it's perfectly legitimate and on the up-and-up - so don't automatically exclude a lender from consideration just because they don't have a presence in your state.
Security equals safety
While nothing is 100 percent safe, there are ways to protect yourself and your personal information. One precaution you should take when shopping online for a mortgage company is to check the website to make sure that it's secure. The address of a secure site begins with an "https," rather than just "http." When you see that URL, your personal data, like social security numbers, account numbers, and other financial information, are safe from being intercepted by outside parties.
You can also check to make sure a lender is certified. Licensed mortgage lenders or brokers will have their NMLS (Nationwide Mortgage Licensing System) number displayed on their home page. Check to see if the lender is a member of the Online Lenders Alliance, a trade association established to weed out bad actors and whose members have agreed to abide by a list of Best Practices and abide by industry standards developed by the Alliance. Major lenders may not belong, but membership is a good sign when encountering a smaller lender you may not be familiar with.
Your "private eye" skills
Investigate, investigate, and then investigate some more. Research the companies that you're considering through the Better Business Bureau to make sure that there are no customer complaints pending against them. Many mortgage sites have an abundance of educational information, so spend some time reading up on the lending process. Then, when you speak with a potential lender, ask lots of questions, and make sure that the company answers them to your satisfaction.
Use your common sense as well. The mortgage business is highly competitive. If you come across an advertised rate that is drastically lower than what other lenders are putting out there, be suspicious. It may simply be a rate the lender is putting out there to draw your attention in hopes of selling you something else, but which may have hidden fees or other terms that make it not such a great deal.
Knowing how mortgage rates are priced can be a big help. Usually, advertised mortgage rates will include "discount points," which are a way of buying down a rate by paying an upfront fee to get a lower interest rate, which you may or may not want to do. But an unusually low rate will probably have an unreasonable number of points including. Check the APR listed along with the rate - if the rate is low but the APR is higher than on competing offers, that's a red flag.
Shopping online for a mortgage refinance can make your life easier. But it can also be a nightmare if you don't take the necessary precautions. Follow these three tips, and your online mortgage refinance will be a successful and safe adventure, just like a day at the amusement park.