Avoid These 5 Refinancing Mistakes
If you’re someone who isn’t happy with their current mortgage—whether it’s because you heard of someone having a better rate, you realized the payments are too large or you want to pay your home off quicker, then it’s probably time to look into a mortgage refinance.
Simply put, a mortgage refinance replaces your current home loan with a new one and can be done to reduce the interest rate, cut monthly payments or tap into their home’s equity.
And you don’t need to be years into a mortgage to refinance. If it makes sense financially, you can refinance at any time.
Still, there are some mistakes that those going through the process make. Here are some things to avoid.
1. Being Unprepared:
Once you get the ball rolling, don’t stall. If your new lender gets in touch asking for information, don’t waste time looking for documents and financial info—send it to them right away so everything goes smoothly. If you’re busy at work or about to embark on a family vacation, wait until you have opportune time to get things started.
2. Jumping at the First Offer:
One of the reasons you’re looking to refinance is because you’re not happy. But even if the first lender that comes along offers you better rates, don’t just say yes. Shop around for the best deal, and even check in with your current lender to see if they can do something to make your mortgage more appealing. They might be willing to work with you, saving you some paperwork and time.
3. Waiting too long:
If you hear about a good rate from a friend or see a special deal being promoted, do your due diligence but don’t wait too long before making a decision. Try to get everything done in a couple of days and check out as many lenders as possible. You don’t want rates to rise or something to change before you pull the trigger.
4. Not Thinking About Closing Costs:
During any refinance, keep in mind that you’re likely to be responsible for new closing costs, including a loan application fee, appraisal fees, title fees and attorney’s fees. Be sure you have this money on hand and make sure that these new fees don’t impact the value you are getting overall from the refinance.
5. Adding on to Loan Term:
When refinancing, some homeowners decide to add to the number of years of their loan term, lowering their monthly payments but increasing the total amount of interest over time. Conversely, lowering the terms by five or 10 years can save you a lot, so if you want to change the years, make it lower.
By making smart decisions, your refinancing can be a smooth experience.