Beware! Mortgage Refinancing Mistakes to Avoid
With the economy and housing market slowly recovering, banks are being extra cautious and are making it harder for people to refinance and take out loans in general. Mortgage refinancing mistakes can cost money and waste your time. From your credit score to properly researching different lenders, how you decide to begin your refinance journey can affect your monthly mortgage and how much you can save.
Just like you would for any other financial decision, it's important to do your research. Shop around and compare different rates and lenders to find one that best suits your needs. You can consult our mortgage calculator to determine what your principal and interest payment would be with the new loan.
You should also thoroughly research points on the value of your loan. One point equals one percent of your loan amount. Some offers can seem enticing, promoting a low or zero points to refinance mortgage. This is where it's easy to get confused. The lower the points, the higher you'll pay in other areas.
You may be inundated with email, advertisements and mail to try and sway you to a different lender instead of your current bank. Don't rush into leaving your current institution so quickly. If you have a good relationship with your bank and have been a longtime member, and they already have all of your documentation, you may consider refinancing with them as well. You also might be able to negotiate a better term for your loan. Remember, once you find a rate you are happy with, be sure to lock it in, as rate locks have an expiration date.
Another topic to discuss when refinancing is figuring out what you'll do with the money you save from this process. Once you calculate how much you will save, think about the best ways to utilize this money. Whether you want to pay off a loan or repair or renovate your house, make sure you have a goal in mind.
As mentioned earlier, you don't want to refinance with a 30-year term if that's the term you already have. Try to knock off five years from the life of the loan -- otherwise you could end up spending thousands of unnecessary dollars.
Keep in mind the refinancing process could take anywhere between 60 to 90 days.