1. The
new interest rate does not justify the refinancing
Before you go ahead and refinance your mortgage, you have to make sure
that the change will save enough to justify the whole process of refinancing. As
a rule, if the interest rate does not decrease by at least .0075 (.75 %) to .01
(1 %) the refinancing is probably not a good move.
2. Not knowing your real closing costs
Closing your mortgage is usually a charged service. By law (in the
United States), closing costs must be disclosed within 3 working days of the
loan application. Each lender has is own way of calculating the closing costs.
Initially, your closing cost are an estimate. However, once your specific loan
details are known, the closing costs are no more a mystery. Use the worst case
scenario, if you still make a profit with that scenario, and if your new
interest rate justifies it, you can consider refinancing.
3. Knowing why you are refinancing
A lot of people refinance just to reduce their interest rate. This is
not always at your advantage. You have to make sure that you recoup all the cost
that are involved in the refinancing operation. Some other reasons might force
you to refinance. One of them might be debt consolidation, another one some home
improvements, or another large purchase. Some of these options may offer you
some other financial advantages or personal advantages, like using some cash to
purchase a car. In some cases you may be able to deduct some of the interest
charges on your tax return. Any big decision like this one should always be
preceded by a consultation with an expert (accountant or tax attorney).
4. Only listening to the APR advertising
The Annual Percentage Rate (APR) is not everything. Very often
brokers will use the APR as a "teaser". This will get your attention, but the
refinancing could cost your more than what's advertised. Such low rate are
usually calculated by using a 30 year mortgage loan together with an accelerated
bi-weekly mortgage plan. Very often, lenders will let you, AT NO EXTRA CHARGE,
select an accelerated bi-weekly mortgage plan. Make sure you know all the facts
before you start any refinancing.
5. Not knowing the mortgage broker's plan details
It's simple, you want to do your refinancing in the shortest amount
of time and with as little hassle as possible. Ask your mortgage broker if he
has performance guarantees and service plans. If he does, make sure your
mortgage broker offers the quality of service you need.
6. Not knowing the broker's products
If you don't ask, you won't get. If all the mortgage brokers were
equally created, you wouldn't have to, but it's not the case. You have to know
what your broker has to offer you, what loan products are available, the terms
and the rates. Sometimes, just what looks like a subtle difference, could save
you (or cost you) thousands of dollars.
7. Failure to examine your credit problems
The majority of people have no idea what type of credit they have or
how to repair any unfavorable credit which may exist. They fail to realize that
credit is one of the key factors in refinancing a current mortgage. Credit
problems not only bring down to a crawl the process of getting a loan, but can
damage your ability to make numerous other purchases.
8. Not knowing how much money a lender is willing to
loan you
If you are planning on refinancing your home, you must be aware that
most lenders have strict guidelines on how much money they are willing to lend.
The lender's decision is usually based on your loan-to-value ratio. In other
words, mortgage lenders have limits on how much money you can borrow based on
the value of your house.
9. Failure to find a reputable and experienced mortgage
lender
You must associate yourself with a honest, high quality, and
service-oriented mortgage lender. This is probably the most important ingredient
in finding good home refinancing. Dealing with the right lender can mean the
difference between having your loan refinancing approved or rejected.
10. Lying to your mortgage lender
There is nothing like the truth. If you already owe too much,
refinancing might not be the best move. Be ready to give all the information the
mortgage broker requests (income tax information, credit card balances, other
loans, current mortgages, etc.)
DISCLAIMER: The information contained herein is deemed accurate and correct, but
cannot be warranted against changes subsequent to the time of it's publication.
This material is not intended or offered as legal, investment, real estate,
mortgage, insurance, tax, or other advice. The author and the publisher assume
no liability for the use (or misuse) of the material contained in this
publication or related materials. This material is not warranted for any
particular or general purpose whatsoever. Viewers of this material assume any
and all risks for any use of this material.
