Refinance your home loan to save money with mortgage interest rates so low right now. It’s not as easy as just finding a good rate. There’s more to it. These are 10 common mistakes homeowners make when refinancing their home mortgages. Do not shop around.
It is amazing to see how many borrowers just go straight to their bank for a loan or refinance. How many people simply look at a few rates and choose the one that offers the lowest rate. They may assume that they need to refinance their existing Beverly Hills Mortgage Broker.
It pays to compare the offers when shopping for a mortgage refinance. Savings of up to tens of thousands of Dollars can be achieved by lowering your mortgage rate by just one-eighth, or one-quarter of a percent.
Pricing mortgages can be complex. There are many variables that affect the final cost. It is important to compare rates, terms, and fees from different Beverly Hills Mortgage Brokers. Take your time to find the best deal.
Fixing on the Mortgage Rate
Borrowers make the most common mistake of focusing on the interest rate only when comparing different Beverly Hills Mortgage Brokers. There are many factors that go into the pricing of mortgages. A low rate from one lender may actually be more expensive than one with a higher rate.
Beverly Hills Mortgage Brokers can vary in closing costs. Sometimes, a low rate can be used to hide a loan with high fees. Advertised rates often include discount points that the borrower pays for, which is a way to purchase a lower rate.
Prior to applying for a loan, be sure to ask about the loan origination fees, points and credit reports. They are not finalized until you get your Good Faith Estimate after you submit your application. However, any significant changes at that time are a red flag that there is something wrong.
Not enough savings
It will take you long to pay off your closing costs if you get only a half-point reduction in your interest rates. This is known as the break-even level. It’s how long it takes for your refinance savings to surpass what you paid.
If you refinance and pay $5,000 closing costs, you will reach break-even in 50 months. This is just under four years. If you only save $50 per month, you will need eight years to break-even. You might even have sold your home and moved before then.
Experts say that refinancing is worth it if you can reduce your rate by at least three quarters of a percent. Because of the greater savings, high-end homes may be able to afford a lower rate reduction than those with lower prices. If you intend to live in the house for a long period of time, a small reduction may be worth it.
Time to Time the Mortgage Rates
Borrowers may try to get in when interest rates are lowest by watching daily changes in refinance rate rates. They often miss the boat and rates shoot back up. Timing the mortgage interest rate is like trying time the stock market. It’s hard even for experienced professionals. Take it in this perspective: rates are still low than they have been for the majority of the past 50 years. Getting greedy about fractions of percent could lead to a missed opportunity.
Refinancing Too Often
A handful of individuals who have refinanced their mortgages are now rushing to do it again to lock in the best interest rate. This is a tempting proposition, but it can also lead to trouble if you don’t take care.
Refinancing is expensive. Refinance of a mortgage will typically cost you between 3-6% and 6% in closing costs. Higher-balance loans may have a lower rate. Refinancing is only possible if you have enough interest savings to cover closing costs.
In pursuit of ever-lower rates, some homeowners make the error of refinancing too frequently. The homeowner accumulates closing costs, which leads to an increase in their loan balance. This negates the benefits of refinancing.