Refinancing

Mistakes homeowners make when refinancing

Thursday, September 20th, 2012

mortgage-refinanceAre you planning to refinance your current mortgage but afraid cause you might screw things up? There are common mistakes homeowners fall trap to. Remember though that these slip ups are avoidable and it starts by knowing what they are:

Not shopping enough for lenders

When refinancing, you cannot go over-shopping for lenders. You need to look for the best one that suits your needs. You give up your choice if you grab at the very first lender who wants to help you. The real estate environment today does not give you much on getting large differences in terms of interest rates. The small differences though may add up over time so finding the best lender to work with means saving a lot of money through the length of your loan.

Not putting the fees and costs in the equation

Refinancing will cost you money. That is a reality that you cannot escape from. Homeowners need to factor in all prices and costs and see if it will not outweigh the potential savings. Refinancing is about how long you will be able to recoup the expenses you need to make when refinancing. Take into account the application fee, appraisal fee, inspection fees, loan origination fee, and the points you would like to take. The fees will really depend on the requirements of your city or state.

As much as possible go for a loan that can give you at least one percent lower rate compared to your existing interest.

Not going for short-term loans

You also have a choice when it comes to the number of years you will pay off your loan. A lot of home buyers go for the longer term loans like the 20- or 30-year loans. Short-term loans like a 15-year loan will mean higher monthly amortization. The latter though will result to you paying off your loan earlier. Over the life of the real estate loan, you will be saving a lot of money with a shorter loan plus the interest rates are a lot lower too.

Not locking in the interest rate

Getting a big loan involves some apprehensions and some homeowners might take some time before deciding. Do not forget though that you can lock your interest rate as soon as possible. Confirm your rates before there is movement in the market again.