Home Loans with ‘No Fee’ A Bargain? Maybe Not

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Long term savings on your Home Loan

When getting a home loan, everybody wants to get the best bargain. For a lot people, that means getting the lowest interest rate at no cost. But this is not always the best bargain for the borrower.

Many times a home owner will take that option and find themselves refinancing again in 2-5 years just because interest rates went a little lower. Every time you refinance your home you start the loan term all over again. That means if you had a 30 year fixed rate loan and if you refinance after only a few years, then you will have to start that 30 year loan term from the beginning for a full 30 years. That could cost you thousands of extra dollars over the years. This is money that goes to the banks and not toward your own investments. The banks love it when you refinance because they make money.

Don’t count on the banks to give you the best advice. Remember they want you to refinance even if it’s not the best bargain for you in the long term.

If you plan on staying in your home for more than 5 years it may be a better bargain to pay some fees up front and buy your interest rate down to a lower rate.  Then you don’t have to try to refinance every few years trying to chase interest rates down. The money you spend in the beginning may save you thousands and thousands of dollars over a 5 or 10 year period.

The lesson is: Pick a loan professional you can trust. Choose someone who is more interested in establishing a long term relationship by doing what is right for you instead of someone who has a quota to meet.

For a free, no obligation analysis of your current loan, give us a call at 408 684 4469

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