Renovate

7 Mistakes to Avoid When Refinancing

Right now, everyone is looking to save money, pay off a few credit cards or a car loan. Homeowners have equity built up in their home and can use this equity to refinance their home. The money can be used to pay off debt, add a new room, remodel your home, or help send your child to college. However, before you decide to refinance your home it is important that you understand all the options available to you.

Many people jump into refinancing their homes when interest rates drop. Most homeowners have no idea what to expect when they try to refinance their home. There are 7 very common mistakes that all homeowners make when they refinance their home. 

Not Saving Enough Money 

When you refinance your home, you need to save enough money to justify refinancing. If you can’t decrease your interest rates by at least .75 to 1%, then there is no need to refinance your home. 

Overlooking Closing Costs

Many people have no idea what their closing cost will be when they refinance their home. However, by law, any loan institution has to disclose your closing cost within three days after submitting your application. There are different ways a loan institution can calculate your closing costs. Unfortunately, until your loan details are clear, the closing costs quoted to you are only an estimate. It is necessary when refinancing your home that you are prepared for the worst-case scenario. 

Lacking a Reason for Refinancing 

Some homeowners refinance their home and never understand why they have done this. The major reason behind refinancing is to lower your interest rates. However, you may choose to refinance your home to consolidate your debt, finance a major purchase, or make home improvements. Before refinancing your home, it is important to talk to your accountant to find out if it is possible to deduct your interest payments from your taxes. 

Understand APR Teaser Rates

It is important that you understand APR teaser rates before refinancing your home. There are some mortgage brokers that use APR teaser rates to get your attention. Teaser rates are most commonly found in adjustable-rate mortgages and hybrid ARM's. The teaser rate has a fixed period of time you will pay a certain interest rate on your loan. After the time period the interest rate becomes adjustable. Before signing any loan documents it is important that you fully understand the interest rate for the life of the loan. 

Weighing Adjustable Rate Mortgages

Adjustable rate mortgages can be beneficial to some homeowners. However, when refinancing your home it is important that you weigh all the pros and cons of your ARM loan before signing. At first, the ARM can help to minimize your monthly payment, but can cost you more in the long run. Some ARM loans have additional refinancing charges when they adjust the interest rate on the loan. Fully understand the ARM loan, refinancing charges, increased interest rates, and full terms of the loan before signing.

Review Mortgage Broker Services

Many people are unaware of the service a mortgage broker should offer you. When you decide to refinance your home, the process should be accomplished quickly and be hassle-free. Before deciding on your mortgage broker, ask for a list of the services they provide and what their performance guarantees are. 

Consider all Available Loan Options 

Many people think that there are only a few refinancing loan options available. However, there is more than one plan with different terms and rates. The complex difference in the different loans available can either save or cost you thousands of dollars. It is important to understand the different loan packages before selecting the one that is right for you. 

In Conclusion

Before signing any documents to refinance your home it is important to know what you are signing. Your mortgage broker should help you understand the difference in the loan options available, fixed or adjustable rate mortgages, and what their services offer. The main objective of refinancing your home is to save on the interest rate you pay each month.

 

Image: pixabay.com

Sarah Johnston

About Sarah Johnston

Enjoying the good old years of retirement. No sorry this isn't me. I just love the picture of my great grandmother and use it on all of my accounts.

Sarah Johnston

Top Posts | Home Services

How To Keep Your Deck Beautiful For Years To Come

When your deck was first constructed, the plans were inspected to ensure they met the local building code before a permit was ever issued. When the deck was finished the structure was then likely inspected by your local building authority. Workmanship is all important and the goal is to have a stur ...

Reclaimed Material Makes Your Pocketbook More Efficient

Everyone has a different aesthetic take on things. Preferences are unique from person to person. Where someone likes bright and flashy colors, the person next to them may be content with something that is more elegant and toned down.This difference of opinion can be found in all fields of design. W ...

Do It For Me Takes Precedence

Anyone who has ever set out to undertake a Do-It-Yourself project is aware that one cannot always expect to achieve the desired results. Others might not have the time and, in other cases, the patience to follow the instructions of a DIY project. That is the reason a new trend, Do-It-For-Me, has ar ...

6 Things You Should Never Clean With Vinegar

As one of the “magnificent four” of home-made cleaning products, vinegar has always had its uses and is even today preferred next to labeled cleaners as it is cheap, available, and effective for your home cleaning needs. But even vinegar has a limit to its uses. There are some things th ... ...

Google Moves into Home Services

For a huge number of people, Google is the answer to everything. No matter what kind of information you need from the internet, chances are that the first thing you do is type in your query on Google. One of the largest search providers in the world, Google has retained its top spot for a long time ...

Is a Mortgage Interest Saver Account Right for You?

If you’re a home owner looking for a way to statically pay off your mortgage sooner, then you should consider a mortgage saver account. The purpose of this account is to help the homeowner pay down the principal balance of his existing mortgage quicker. A mortgage saver account is actually a ... ...

Old Homes Can Also Be Smart

What’s better than a house that is 'smart'-enough to know how to act throughout the day based on your routine, and also saves you money in the process? These ‘smart’ homes are getting more and more popular by the day and can be seen being built in many parts of the world. ... ...

7 Mistakes to Avoid When Refinancing

Right now, everyone is looking to save money, pay off a few credit cards or a car loan. Homeowners have equity built up in their home and can use this equity to refinance their home. The money can be used to pay off debt, add a new room, remodel your home, or help send your child to college. Howeve ...

Hellotech at Your Service

It’s almost unbelievable how much technology has started to affect our lives. Everywhere we look, there is technology. Imagining that there was once a world without it all is simply fantastical and unrealistic to most people. It seems like the world might end if technology were to be taken ou ... ...