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Refinancing your home loan can be a great move for your finances, but certain mistakes end up costing homeowners greatly. The process isn’t as simple as just finding a good interest rate and jumping at that opportunity.
Get all of the latest St. Louis housing information from Better Rate Mortgage and let our team of mortgage pros help you to understand your options.
Here are 4 common refinancing mistakes you need to avoid:
1. Going Straight to Your Regular Bank
You don’t have to go to the bank that gave you the first mortgage when you want to refinance your home. Sure, that bank can offer the best deals in the end, but you won’t know that for sure unless you shop around to see what others are offering.
2. Not Taking into Account All the Other Costs
Are you trying to choose a refinancing opportunity only based on interest? Well, there are plenty of other costs that should influence your decision as well.
Closing fees, for instance, can differ from lender to lender, and though you find a decent interest rate at one in particular, they could have some pretty high, not-worth-it closing costs. Be sure to ask the lender about all the other fees they usually require when shopping for a refinancing loan.
3. Taking Out Way Too Much Home Equity
People sometimes use a mortgage refinance to borrow against their home equity and take out some cash. If you have some repairs or are otherwise in need of money, this can seem like a good option to get it.
However, taking out too much could potentially hurt you down the line if the housing prices fail, not to mention that it could increase your mortgage payments beyond what’s comfortable for you to cover.
4. Extending Your Loan
Mortgages are usually decades-long commitments, and by the time you refinance it, you likely have already paid a good portion of those decades. But, refinancing shouldn’t be an opportunity to extend your loan. In fact, that’s not a good decision at all, because although your monthly payments will be smaller, you’ll pay a lot more in interest.
The refinance is better if you opt for a short-term loan that can match the number of years left on your current mortgage. So, if you had a 30-year mortgage, paid 15, get a 15-year loan, which will likely come with lower interest rates and will not increase your monthly payment.
Only extend your loan if your finances aren’t great and you need a smaller monthly payment to make it through, and only if other options aren’t available to you.
Contact the Sean Z Team!
Navigating the world of mortgages and refinancing opportunities can be difficult to make. Still, a good loan advisor can sit down with you and help you make the right decision for you and your family.
