Five Common Mistakes when Refinancing
Refinancing your mortgage can be a great way to save thousands of dollars over the life of your mortgage loan. But have you sabotaged yourself and your finances committing these common mistakes after deciding to refinance?
Starting Renovations before the Appraisal
Doing some home improvements is a great way to improve the value of your home. But if you are going to do those improvements, make sure you get them done before the home appraiser comes to put a value on your home. Few things can reduce the value of your home more than a home that is going through major repairs. Just to be safe, don’t start doing renovations until after the home appraiser has completed their appraisal.
Ignoring the Lender
If you have applied for a refinance loan, be sure to stay in contact with the lending institution until the process is completed. A few years ago, lack of communication wouldn’t have been such a big deal. But with the stricter guidelines that lenders follow these days, you need to communicate often with your lender to avoid problems with your refinance loan. You will need to submit documents during the process as well as other information. The sooner you respond to requests from your lender, the smoother your refinance loan will be.
Doing another 30-Year Mortgage
When you refinance your home, don’t just start over by getting another 30-year mortgage. This is going to result in thousands of dollars in interest that you could otherwise saved. If you have had your mortgage for 10 years, don’t refinance for anything longer than a 20 year mortgage. If you can afford the monthly payments, refinance for even fewer years.
Waiting for Lower Rates
If you delay locking in your interest rate for your refinance, you could miss your chance at getting a low rate. While waiting for a lower rate, mortgage rates could actually go up and you could end up paying more. Also, if you have your rate locked in, know the expiration date. You should make sure you have a buffer of a few days so you can close your mortgage loan before the locked rate expires.
Not Knowing Your Home’s Value
With home prices dropping all over the country, you should be realistic about what your home is worth. If prices in your neighborhood have dropped, chances are that the value of your home has dropped as well. Be prepared for the appraiser’s report and don’t expect too much or you may be very disappointed.
Knowing these mistakes that many homeowners make when they choose to refinance can help you avoid them yourself. Some of these mistakes could cost you thousands of dollars so learning from other people could be great for your bank account.
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