For the best refinancing deal, do your homework

By Ilyce Glinkand Samuel J. Tamkin
Friday, March 4, 2011; 11:36 AM

Q. My wife and I are thinking about refinancing our house. We are considering using a particular mortgage broker, but they have had a number of complaints with the Better Business Bureau and have a B rating. So how do we decide whether we should refinance with them?

We currently have a fixed 30-year mortgage and a rate of 6.375 percent, but we think we can get a rate around 5 percent. My wife and I both have excellent credit. We are looking for another 30-year fixed with no prepayment penalties.

A. Why would you work with a company that has a less than stellar rating with the BBB and has lots of complaints? Why wouldn't you look at four or five different lenders, including national banks, credit unions and another mortgage brokerage firm? You should be working with each, getting their best offer, and then pitting them against each other so that you're negotiating a tough but very fair mortgage offer.

Sounds to me that you aren't really doing enough work to know if you're getting a good deal - and that tells me that you're not ready to refinance. With hundreds of lenders out there, you may be able to find a lender with a better rating.

The Better Business Bureau rating is only one consideration you should use when choosing a lender. However, if the company doesn't have a stellar rating and many of the complaints are from the office you plan to use, are you willing to become a borrower that has to complain to the Better Business Bureau and lose whatever rate you locked in because you chose poorly?

You may find that the larger the lender, the more complaints that they receive. And you should use that information when comparing lenders and consider the size of the lenders. However, the lower rating by the Better Business Bureau may indicate that some complaints may have been unresolved.

Take a look at the Better Business Bureau Web site and determine whether there is a pattern or problem with this lender. Also, if the lender is national, you may find that the grade this lender gets is for their complaints across the country.

Finally, type the name of the lender and the word "complaint" into Google's search engine and see what comes up.

Q. You have written, " . . . When you sell your primary residence, you can make up to $250,000 in profit if you're a single owner, twice that if you're married, and not owe any capital gains taxes." My ex-wife and I were married when we purchased our home 18 years ago; we divorced one year ago. I live in the home, but we both still own it. We are planning to sell the property. Can we still receive the $250,000 per person exemption?

A. You live in the property, so you would get the $250,000 exemption. If she lived there for two of the past five years as her primary residence, then she would be entitled to take the exemption as well. Since you are divorced and file separately, you would each exclude up to $250,000.

However, nothing is that clear-cut when it comes to the IRS. There are a number of issues that go into determining whether you and your ex-wife would be entitled to the exemption.

It would seem that you should be able to get the $250,000 exclusion. But if you are expecting to file your own tax return and get a bigger benefit, you won't. If you file separately - and I assume you now file separately, as you are divorced - you would be limited to the deduction for a single individual. Please consult your tax adviser for more details.

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