Mortgage Refinancing - Points—What are They and What Do They Cost?

After you have made application, either on the Internet or traveled to the place of business, you will have a conference with a loan officer. The loan representative will be available to answer questions on how you can best meet your financial goals through the impending loan transaction. At this meeting, you will do the following:

Decide on the type of mortgage that best meets your needs—fixed rate or in some cases an adjustable rate mortgage (ARM).
Decide whether you will tap into some of the equity in your home by obtaining a “cash-out” refinance or whether you prefer to minimize up front costs by a “no-cost” refinance.
Obtain the best deal that you can. On any given day, lenders and brokers may offer different prices for the same loan terms to different consumers, even if those consumers have the same loan qualifications. The most likely reason for this difference in price is that loan officers and brokers are often allowed to keep some or all of this difference as extra compensation. Generally, the difference between the lowest available price for a loan product and any higher price that the borrower agrees to pay is an overage. When overages occur, they are built into the prices quoted to consumers. They can occur in both fixed and adjustable rate loans and can be in the form of points, fees or the interest rate. Whether quoted to you by a loan officer or a broker, the price of any loan may contain overages. Have the lender write down all the costs associated with the loan. Then ask if the lender or broker will waive or reduce one or more of its fees or agree to a lower rate or fewer points. You’ll want to make sure that the lender is not agreeing to lower one fee while raising another or to lower the rate while raising points.

There’s no harm in asking lenders if they can give better terms than the original ones they quoted or than those you have found elsewhere.
Once you are satisfied with the terms you have negotiated, you may want to obtain a written lock-in from the lender. The lock-in should include the rate that you have agreed upon, the period the lock-in lasts and the number of points to be paid. A fee may be charged for locking in the loan rate. This fee may be refundable at closing. Lock-ins can protect you from rate increases while your loan is being processed; if rates fall, however, you could end up with a less favorable rate. Should that happen, try to negotiate a compromise with the lender.
Review your disclosures in particular (which should be given you at the time of application or within three days).
Go over the Good Faith Estimate of Settlement Costs, which estimates your closing costs.
Review the Truth in Lending Statement, which shows your estimated monthly payment, the cost of your finance charges and other facts about your mortgage.
Find out how long the process will take before you get final approval and can close the transaction. Generally, refinances are processed much faster than original mortgage loans. However, appraisals do take time so two to four weeks is likely. Check that your lock rate extends to the scheduled closing date (and a little beyond for safety.