If you’re looking to refinance your mortgage, make sure to steer clear of these 3 common mistakes people commit.
With the average mortgage rate as low as it is, homeowners can save a lot of money by refinancing their home loan. But, unfortunately, it’s not as easy as pie. You can’t just find a good interest rate and jump on it—there’s a lot more to it than that. Here are three mistakes that homeowners find themselves making when refinancing a home mortgage which are the ones that you should avoid making.
- Not shopping around for the best rates.
It’s quite astonishing how many borrowers simply find a lender and then just go with that lender without checking other sources. Shaving off just one-quarter of one percent from your mortgage can save you tens of thousands of dollars over the life span of your average loan. Refinancing is an entirely new mortgage, so you’ll need to find and submit them all over again. That is why it’s very important to work with a mortgage broker, they work with many lenders and they shop around for you to find the best rate they can to meet your needs.
- Not getting a larger reduction.
If you only manage to get half of a percentage point, it’s going to take a very long time to reach the break-even point: where your interest savings exceed your closing costs. Many experts recommend getting at least three-quarters of one percent to quickly reach the break-even point and make the refinance worthwhile. An exception to this rule is if the lender is covering all or a good portion of the “non-recurring” closing costs, than it would be worthwhile taking a small reduction in rate. It’s important to discuss the benefits with your mortgage broker.
- Cashing out too much home equity.
Lots of people use their mortgage refinance as an opportunity to take out some cash and make some much-needed home repairs. This isn’t necessarily bad, but it does take a turn for the worst if they take out too much and house prices begin to fall (i.e. in 2008). Be sure to have enough of a healthy cushion should this happen again.
Refinancing is good for your home, but it can very easily turn into a disaster—much like pie. For all of your home loan needs throughout Solana Beach and San Diego County, as well as all of California, contact Elvin Wesley at Ranch & Coast Mortgage Group Inc. We have the experience needed to make sure you get the right mortgage.
