Refinancing? Avoid these 5 Refinancing Mistakes!
Owning a home offers great benefits to a homeowner, such as the ability to use the equity that's built up over time. Home equity can truly provide value and security to your future. You may find yourself in a situation that leaves you needing to take advantage of refinancing your mortgage to lower your payments or to take advantage of a lower interest rate. However, while you may have equity available, there are some mistakes homeowners make that prevent them from being able to refinance. Check out 5 mistakes you should avoid to prevent not being able to tap into your home equity when you need it.
1. Not Doing Your Homework
You may just be thinking about going with your current mortgage lender to refinance your home because of the convenience factor. However, if you’re planning to contact your current lender about refinancing without doing some comparison shopping first you could be selling yourself short. With rates still relatively low across the board, it may seem like a waste of time to shop around. But it could mean a huge difference in the amount of money you’ll save.
2. Opening New Credit Accounts
Just like when you obtain your first mortgage, lenders will check your credit when you apply for a refinance, and they check it again just before settlement. Making major purchases on credit or applying for new credit could lead to delays in the approval process. Every time you open a new credit account, your credit score drops. Lower credit scores translate into higher mortgage rates.
3. Forgetting to Consider ALL Costs
Typically, lowering your monthly payment is the ultimate purpose for refinancing. But it should not be the only factor you weigh. Before you even begin the refinance process, check your current mortgage documents to make sure your loan doesn't contain a penalty if you pay off your mortgage early. Weigh the amount of time you have left on your current mortgage, and factor in the refinance closing costs. Look at all fees when comparing refinance offers. Run the numbers on different scenarios by changing the loan amount, and looking at the cost with and without upfront points.
4. Not Considering What Could Go Wrong
The refinance process can be relatively straightforward for homeowners with great credit, strong equity positions, full income and asset documentation, and long-standing employment. But not every homeowner fits this into this spectrum. As a result, the refinance process can be bumpy. Some things that can slow down the refinance process could be anything from the proper paperwork not being submitted in a timely manner, your income may have changed, or the appraised value of the home may not come back as high as expected.
5. Choosing the Wrong Loan Term
For most homeowners, refinancing is all about getting a better rate. But it’s also an opportunity to change the length of your loan. Typically, you’ll be able to choose from a 15, 20 or 30-year loan. With a longer loan term, you’ll pay more in interest but your monthly payments will be lower. On the other hand, going with a shorter loan term will save you money on interest and allow you to pay your loan off faster, but your monthly payments will be higher. You need to know which one makes the most sense for your situation.
By avoiding these common refinancing mistakes, you'll more easily be able to complete the refinancing process with very few hiccups or delays. Unsure if you should refinance your mortgage? Let us run the numbers to see if refinancing makes sense for you! We can help you explore your options. Call MHQ - Mortgage HeadQuarters at (573) 302-9990 to get you started!
Mortgage Headquarters of Missouri, Inc
4824 Osage Beach Parkway, Suite 1
Osage Beach, MO 65065
Office: (573) 302-9990
Toll Free: (888)799-1206
Fax: (636)648-9917
NMLS # 1229111
1. Not Doing Your Homework
You may just be thinking about going with your current mortgage lender to refinance your home because of the convenience factor. However, if you’re planning to contact your current lender about refinancing without doing some comparison shopping first you could be selling yourself short. With rates still relatively low across the board, it may seem like a waste of time to shop around. But it could mean a huge difference in the amount of money you’ll save.
2. Opening New Credit Accounts
Just like when you obtain your first mortgage, lenders will check your credit when you apply for a refinance, and they check it again just before settlement. Making major purchases on credit or applying for new credit could lead to delays in the approval process. Every time you open a new credit account, your credit score drops. Lower credit scores translate into higher mortgage rates.
3. Forgetting to Consider ALL Costs
Typically, lowering your monthly payment is the ultimate purpose for refinancing. But it should not be the only factor you weigh. Before you even begin the refinance process, check your current mortgage documents to make sure your loan doesn't contain a penalty if you pay off your mortgage early. Weigh the amount of time you have left on your current mortgage, and factor in the refinance closing costs. Look at all fees when comparing refinance offers. Run the numbers on different scenarios by changing the loan amount, and looking at the cost with and without upfront points.
4. Not Considering What Could Go Wrong
The refinance process can be relatively straightforward for homeowners with great credit, strong equity positions, full income and asset documentation, and long-standing employment. But not every homeowner fits this into this spectrum. As a result, the refinance process can be bumpy. Some things that can slow down the refinance process could be anything from the proper paperwork not being submitted in a timely manner, your income may have changed, or the appraised value of the home may not come back as high as expected.
5. Choosing the Wrong Loan Term
For most homeowners, refinancing is all about getting a better rate. But it’s also an opportunity to change the length of your loan. Typically, you’ll be able to choose from a 15, 20 or 30-year loan. With a longer loan term, you’ll pay more in interest but your monthly payments will be lower. On the other hand, going with a shorter loan term will save you money on interest and allow you to pay your loan off faster, but your monthly payments will be higher. You need to know which one makes the most sense for your situation.By avoiding these common refinancing mistakes, you'll more easily be able to complete the refinancing process with very few hiccups or delays. Unsure if you should refinance your mortgage? Let us run the numbers to see if refinancing makes sense for you! We can help you explore your options. Call MHQ - Mortgage HeadQuarters at (573) 302-9990 to get you started!
4824 Osage Beach Parkway, Suite 1
Osage Beach, MO 65065
Office: (573) 302-9990
Toll Free: (888)799-1206
Fax: (636)648-9917
NMLS # 1229111
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