5 Mistakes Homeowners Make When Refinancing Their Home

Refinancing your home at some point can help you save a significant amount of money. If your credit has improved, your home is worth more than it was when you bought it, or you have a change in income, then these are all good opportunities to look into refinancing. However, it's important that you do not fall into making these five mistakes:

Over-Estimating Value of the Home: Before you refinance your home, you need to have your home appraised to determine its value. This will ensure that you are not receiving loan offers that do not match what you will actually receive once you are ready to apply for it. These loan offers can be misleading, which can result in you wasting your time attempting to refinance for a better rate. 

Believing You Will Get a Better Rate Later:  The problem with interest rates is that they change so drastically. It's hard to predict when you will receive a low interest rate or a high one. Instead, once you are ready to refinance, it's best to jump on an offer that has a much lower interest rate than what you are currently paying. This is the only way to guarantee that refinancing your home has been worth it. 

Looking Only at Interest Rates: Another common mistake is looking only at the interest rates. The problem with this is that, yes, your interest rate may be lower, but the time you have to pay it off may have increased, which means you are essentially paying more or about the same for your home than you were before refinancing. 

Choosing Only a Longer Term Loan: When you receive your loan offer, many people are quick to jump on the longer term loan because you are paying less each month. However, it's going to take longer to pay your loan, and you will be paying more in interest. If you can afford the monthly payment, always choose the shorter loan so long as the interest rate is also reasonable. 

Forgetting Documents: When you refinance your home, it's best to have all of your documents ready. This includes your bank statements, tax forms, and more. If you are unsure what documents to bring, call your mortgage lender, and they can give you a better idea. This way, you are prepared and the process can be completed as quickly as possible. 

When you avoid making these five mistakes, you can be sure that refinancing your home is going to be worth it in the end. For more information, contact a mortgage lender like Titus Financial Ltd.