Refinancing:Common Mistakes To Avoid

Refinancing:Common Mistakes To Avoid

If you are considering refinancing your home loan, you should make informed decisions. You need to note that refinancing process might be complicated and a small mistake can cost you a lot in the long run. There are several mistakes you need to avoid to ensure that everything moves well. Below are some of the common refinancing mistakes you need to avoid.

Being unrealistic about your home’s value

One of the greatest mistakes you can make is overestimating the value of your home. Despite recent high prices, you should not make assumptions regarding the value of your home. By doing this, you may sabotage the entire refinancing process before you even begin. Therefore, be reasonable and realistic so that you can really get the actual value in order to make the refinancing process a success. You can seek advice from realtors or use home valuation sites to get the right estimate of your home.

Failure to shop around

Failure to shop around before you contact your lender for refinancing can end up costing you more than you expect. You might feel as if you are wasting time as you shop around, but you will be amazed on the amount you will save in the long end. So, you better shop around to find out if there are cheaper options.

Selecting the wrong home loan term

The most important aspect in refinancing is to ensure you get friendlier rates. However, this should also be a good opportunity for you to change the duration of your home loan. It is good for you to understand if it is a short or long term loan that makes a lot of sense to you. You need to know that for a longer term home loan, the interest you pay will be higher, but monthly payments will be low. On the other hand, if you opt for short term, you will pay lower interest, but your monthly payments will obviously be on the higher side. Consider the option that fits your budget by calculating the numbers using home loan calculators.

Waiting for the rates to reduce

As you look for a home refinance loan, you might be tempted to hold on until the rates go down. This might get you get a good deal, however, if the rates start to increase, you will miss out. When you get a great offer, you need to confirm with your lender so that you can lock in the rate. This safeguards you when the rates climb and you also have the opportunity to refinance again when the rates go down.

Failure to consider closing costs and other fees

Refinancing can help you save a lot of money. However, you should not forget that you will also be required to spend more money as you close on the home loan. You should not only consider the interest rates. The origination fee of your loan can cost you a lot of money. You also need to be aware of other costs such as home loan application fee, title fees, appraisal fees and even the attorney’s fees.