The Internet is a great resource to have when it is time to refinance online. With it, you can easily compare loan offers for dozens of online lenders without making too many calls or visiting too many banks. But caveat emptor — buyer beware. Internet lending institutions can overcharge you just as easily as a conventional lender.
Here are some things you should know when it comes time to refinance online:
Who are you dealing with?
There are two types of online lending institutions that will refinance online:
Retail lenders (e. g., mortgage brokers) List brokers Retail lenders
We’re all familiar with conventional retail lenders and mortgage brokers. You will find many of the same ones refinance online as well as offline. And/But when you access them online, you expect to get all the benefits of a conventional lending institution combined with the benefits of not dealing with a brick and mortar location: added speed and convenience, multiple channels to customer support, and (hopefully) lower costs that get passed on to you in the form of lower interest rates.
However, this is not automatically true. Even though we assume that to refinance online means they have lower overhead, there is no guarantee they will pass those cost savings along to you. Verify all the details; read the fine print. Then compare one online lender to another.
The most important thing to remember about list brokers is that they are not lenders at all. When you choose to refinance online with them, they never issue or hold or sell a single mortgage. They are simply generating qualified leads to conventional mortgage institutions. They do this by putting up a website and advertising like mad on TV, radio and newspapers (and online). One company you may be familiar with brags about getting mortgage lenders to “compete for your business.”
Then, when the prospective customers arrive to refinance online, they take down names and numbers — the more the better for them. They sell these names to the conventional lending institutions for hundreds (or even thousands) of dollars. These commissions are usually called “loan origination fees.”
What to avoid when doing a refinance online
When you choose a company like this with which to refinance online, do NOT unknowingly consent to paying loan origination fees if you can help it. Of course, there is nothing illegal about charging these fees — if the fees are disclosed upfront. So read the fine print, i. e., the licenses & disclosure statement. Specifically look for any fees that will come back to you at closing time. If you really want to save, avoid those list brokers that do it and work with those who don’t do it.
When you refinance online you can save a lot of time and money. But you have to know your way around.