Four Common Mistakes Homeowners Make When Refinancing Mortgages
Refinancing can be a great way to reduce your mortgage payments or get extra cash from the equity in your home. Unfortunately, many homeowners make costly mistakes when refinancing their mortgage. Here are four common mistakes some homeowners make so you can avoid them.
1. Forgetting about Closing Costs
One of the main reasons for refinancing is because current mortgage rates are lower than they were when the homeowner purchased the home. But if you just purchased your home a few years ago, refinancing may not save you any money at all. Closing costs can be a couple thousand dollars or even more depending on a variety of factors. Before refinancing, crunch the numbers to see if you are actually saving money on your refinancing when you factor in the closing costs.
2. Not Refinancing at the Right Time
When mortgage rates are at record lows like they are right now, refinancing could be a good idea. But some homeowners wait too long in hopes that mortgage rates will drop even lower. If today’s rates are substantially lower than they were when you bought your home and you would save money be refinancing, you may not want to wait for them to go lower. Rates could start steadily increasing and you could miss your chance to save money. The mortgage market is like any market. I cannot be timed perfectly and rates are already much lower than anyone ever expected they would go.
3. Choosing the Wrong Mortgage Loan
There are several types of mortgage loans to choose from and you should choose the type that is right for your financial situation when you refinance. You do not need to refinance to a fixed rate mortgage loan like many people suggest. And if you are only going to stay in your home for a few more years, an adjustable rate mortgage may be ideal for you when you refinance. You may want to consult with a mortgage advisor to determine which type of mortgage loan is ideal for you before refinancing.
4. Sticking with the Same Mortgage Company Blindly
When refinancing, you do not need to go through your existing mortgage lender. You can shop around and look for other mortgage lenders for your refinance if your current mortgage lender is not offering you the best deal. It is always best to shop around for better mortgage deals when you refinance so you can save as much money as possible.
These are just a few common mistakes that people make when refinancing their mortgage loan. By taking some time and shopping around, you can find the best refinancing deal for your particular situation.