The Top 10 Home Refinancing Mistakes

With rates of mortgage at an all time low, a large number of people are thinking of refinancing their homes. Refinancing is when you change an existing mortgage or loan by replacing it with another bearing different terms such as lower interest rate or interest costs. You can also go in for refinancing when you want to increase your loan repayment time, to reduce the risk rates by changing from a variable rate to a fixed rate scheme and so on. Refinancing can save a lot of money over the life of your mortgage loan. However, if you do not refinance properly, you could lose your hard earned money on the deal as well. Given below is a list of the 10 top mistakes people make when refinancing their homes:

1.Choosing the Best Home Refinance Loan can be a tough job. There are many loans available for different situations like hybrid loans, adjustable rate refinance loans, fixed-rate loans etc. Depending on your situation and need, you must be able to choose the best home refinancing loan. Generally, fixed rate loans are the safest as these save you from unpleasant surprises.

2.Not doing a break-even analysis: To determine if the time frame for repaying the loan is long enough to go in for refinancing, it is essential to do a break-even analysis. The time period it takes for your savings to fully offset the costs is known as the break-even period. A simple way to calculate the break-even period is to divide the total loan amount by your monthly savings. This will give you the number of months you need to continue repaying the loan to recoup your refinancing costs.

3.Not choosing the best lender: People most often notice just the loan rates without giving a thought to the credibility of the lenders providing them. The Internet provides you with loads of information that would help you make a wise decision. You can even compare the features of different refinancing loans before picking one.

4.Failure to get a Good Faith Estimate: After receipt of the completed loan application, the mortgage company is required to provide you with a good faith estimate of costs within 3 business days of applying for the loan. This estimate must contain item wise lists of all costs and fees that come with your loan.

5.Signing the papers before reading them thoroughly: You must be cautious and wary and read the whole document including the terms and conditions thoroughly before putting your signature on the dotted line and closing the deal.

6.Applying for a second mortgage before refinancing the first one: You must never go for a second mortgage before refinancing the first one as all mortgage companies usually look at the combined loan amounts, that is the sum of the first and second loans, even while you are refinancing your first mortgage. This is a common mistake many people make.

7.Many people are unaware of the fact that the loan amount is not based on the value assessed by the county tax assessor. It actually depends upon the appraised value of the property calculated by the real estate agents. This would ensure that you get a fair deal on your loan amount.

8.There can be unnecessary delays in closing the deal if you fail to produce all the documents requested by the lender on time.

9.Do not waste time sitting and waiting for the mortgage rates to come down drastically. You can look for a lender who can help you with the lowest rates possible right now.

10.Always get a written statement from the mortgage company after they tell you they have locked your loan rates. The statement should include all the details of the loan, its duration and the interest rate.

Refinancing your mortgage can mean the difference in paying your mortgage and falling into foreclosure. With proper preparation, the home refinance will go smoothly and the loan will be more affordable in the long run.