low mortgage rates
How You Can Avoid
The TOP 5 Refinancing Mistakes!
With mortgage rates at all-time lows, more and more people are looking to refinance their homes at lower rates. And why not? Refinancing can save you a bundle of money over the life of your mortgage loan. The only problem is that if you do not refinance correctly, you could end up losing money on the deal. No one wants to lose money on refinancing, so to prevent this I am presenting the top 5 refinancing mistakes that people make. Learning these mistakes can make sure that you get the most out of your refinancing.
Failing To Choose The Best Refinance Loan
There is more than one refinance loan out there. There are fixed-rate loans, adjustable rate refinance loans, hybrid loans, etc. The loan that is best for you is going to depend on your situation. For example, in some cases a 15-year term is better than a 30-year term and vice-versa.
Not Doing A Break-even Analysis
For refinancing to make sense, you have to see how long it will take for you to realize your savings. Remember, a refinance is a new 30-year loan. You have to determine if the time frame is right for refinancing. To do this, you need to do a break-even analysis. A simple way to do this is to divide the total cost of the loan by the monthly savings. This will give you the number of months that you will have to stay in the property to break-even on your refinancing costs. For example, if your refinance loan costs $1,500 and you save $75 a month in payments, then you will need to stay in the property 20 months to break even. So, if you plan to move in 2 years, then refinancing might not be the best option. But if you are there 3-5 years, then it would be a good idea.
Paying Too Much For Mortgage Insurance
Mortgage insurance, or PMI, is what you pay on your home in case you default on your mortgage. PMI adds a lot to your mortgage payment. But you don't have to pay PMI if you have an 80% equity stake in your home. If you refinance at less than 80%, then you could wind up paying too much for PMI. So, if you already have 80% invested in your home you should not refinance below that level. In other words, don't cash out above the 80% level.
Fixed vs. Adjustable Rate
When most people think of refinancing, they think of refinancing at a fixed rate. But in some cases an adjustable rate can actually save you money--even if interest rates go up. Adjustable rates are not always easy to follow.
Not Shopping Around For Other Lenders
For convenience, a lot of people simply refinance with their current lender. This can be a mistake because your current lender may not have the best rates. And your current lender may not be able to offer you all the refinancing programs available. Some people think that it is easier to deal with your current lender, but the truth is that the refinancing process is the same for all lenders. So, you'll have to go through the same process with your current lender as with any other lender. So, shop around. The Internet has made it easier than ever to compare different refinancing loans. If you're looking for a website that can help you compare loan offers from different competitive lenders I highly recommended this website, click this link to view . I have gotten many positive feedbacks from friends and family. They have a fast free application, and it doesn't require your social security or credit check. They can provide you with multiple rates for refinance, debt consolidation, home improvement, second mortgage and line of credits.
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