Rethinking How to Refinance Home Loan

Randy Johnson, author of How to Save Thousands of Dollars on Your Home Mortgage, advises you to "look for a mortgage broker who is your advocate, and who charges a reasonable fee and doesn't lie about it." He suggests getting a written fee agreement, in addition to the standard "good faith" estimate of all the closing charges and brokerage fees or compensation paid to the broker by the lender. You can get a sample form at Johnson's Web site.

The advantage of a good mortgage broker is that he or she can get different quotes from different lenders for different products. "A good mortgage broker is constantly researching their lenders' rate sheets to find the most competitive rate for their customer for a specific product on that specific day," says Chicago-area mortgage broker David Hochberg, president of Townstone Financial.

Term limits: If you're planning to stay in your home for many years, it makes sense to take a fixed-rate 30-year mortgage. But if you've already lived in your home for several years, that may stretch out the mortgage. So consider a 15-year fixed-rate mortgage. The rate will be slightly lower, but the payments will be slightly higher. Over the long run, though, you'll save a fortune in mortgage interest.

If you're worried about being locked into higher monthly payments, another alternative is to take the 30-year fixed-rate loan and pay extra on the principal every month, as long as you can afford it.

Closing costs and points: Everyone hates to write a check for closing costs, so there is always a lot of maneuvering on this subject. Try to avoid paying points to lower your rate -- unless your employer is covering this cost through a job relocation package or you're planning to stay in the home forever, in which case the lower rate will save you a lot of interest over the years.