Home Loans
Are You Making These Mortgage Refinancing Mistakes
(presented by www.refinance-refinance.net - mortgage lenders)
By Brooke Ryan
Mortgage refinancing makes good financial sense if done properly and for the right reasons. If done improperly, however, mortgage refinancing can turn into a major financial headache. If your preliminary calculations suggest that going ahead with a mortgage refinance might be beneficial, be sure to avoid these common mortgage refinancing mistakes:
MISTAKE #1 - Not holding onto the property and the loan long enough to recoup the cost of refinancing
Assuming that closing costs and points will be associated with your new mortgage loan, you have to ask yourself how long it will be before you break even, and if you’ll be living in your home that long. If not, refinancing may not be worthwhile. Even if you plan on shopping for a “no-cost” mortgage refinance , you still need to take into account how long you’ll be in the property and how soon you plan to pay off the loan.
MISTAKE #2 - Taking “no cost” refinance literally
In general, you may be required to pay some interest and property taxes at the closing. Additionally, “no cost” could mean that you don’t pay anything up front, but the settlement costs are added to the balance of the loan. If you’re considering a no-cost mortgage, be sure to have your lender define exactly what that means. And, as stated above, the length of time you plan to stay in the house should also be considered.
MISTAKE #3 - Not making responsible use of any cash received from a refinance
Using your home’s equity to pay cash for a new car, plasma TV, and a tropical vacation is not as financially sound as using the money to pay off nondeductible, high-interest consumer debts like credit card balances and personal loans.
While $75 may seem like a lot of money to some, it’s really not when you consider what you !
can, or
can’t, buy with $75 these days. It just doesn’t go very far anymore. If the only reason that you want to refinance your mortgage is to lower your payments by a such a small amount, it may be more worthwhile, and less of a hassle, to cut costs elsewhere in your budget…Do you really need all those extra cable TV channels? Do you really need to stop for a 4-dollar coffee drink on your way to work every morning?
MISTAKE #5 - Refinancing with your current lender without taking the time to shop around for a better deal
While it may be more convenient, working with your current lender may have significant financial disadvantages. A home loan lender would prefer to process refinancing requests for new customers, as it is more profitable to do so. Therefore, the lender’s existing clients are put on the back burner. Why should he or she rush to chop a couple of percentage points off your loan? The only reason a lender would do this for new customers is to win their business. All the lender has to do is make an offer that demonstrates a savings over the new borrower’s existing agreement, and one that would also deter that borrower from signing on with another lender. Mission accomplished. Since your current lender has already won your business, there’s no incentive to give you a good deal.
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Brooke Ryan writes mortgage financing articles for MortgageFinancingExposed.com, where you can compare lenders online, search the MLS, get a free credit report and, more importantly, become an informed borrower. |
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