Stay away from the most common refinancing mistakes

Posted by admin on 07/10/2009 under Debt consolidation | Be the First to Comment

A refinancing craze normally follows each and every time rates of interest fall. Whether you are looking to reduce your mortgage payments, get rid of credit card debts or pay back any other loan, experts say you should fully comprehend all of the alternatives accessible to you prior to taking the decision to refinance.

An established mortgage company, acknowledged for training debtors on the facts behind new home equity loans and refinancing, discloses the seven more common errors many individuals commit during the refinancing process.

1. Not saving sufficient to warrant refinancing

It’s better to trim down your rate by at least .75 percent to 1 percent. This could actually save you in the region of $100/month on a $150,000 mortgage.

2. Not being conscious of your closing costs up front

By law, closing costs has to be revealed within three days of the loan application. Nevertheless, there are different methods to calculating these costs. Until the details of your loan are totally clear, the closing costs cited to you are nothing more than approximations. Thus you should plan for the worst-case scenario in order to not commit this common refinancing mistake.

3. Not fully understanding your grounds for refinancing

In addition to decreasing your interest rate, there are as well other legitimate causes to refinance, such as debt consolidation, home improvement or any other major purchase. In some cases, you might be able to deduct your interest payments on your income tax return. You should consult an accountant or tax lawyer prior to taking these types of decisions.

4. Not being conscious of APR “teaser rates

Another common refinancing mistake is not being conscious of APR “teaser rates.” Some mortgage agents employ annual percentage rates in their marketing just to fetch your attention, but it could actually turn out costing you more. APRs are frequently  calculated by applying a 30-year mortgage paired with an accelerated payment plan. Make certain you know the true interest rate you’ll be paying during the course of the life of the loan.

5. Not considering the pros and cons of adaptable rate mortgages

ARMs could minimize your payment each month, but not whensoever supplemental refinancing takes place. In that case, they could cost more in the long haul.

6. Not being conscious of the service you should require from a mortgage agent

The procedure of refinancing should be hassle-free and achieved promptly. Ask your mortgage agent to supply details of its service plan and performance guarantees.

7. Not being aware of all available products and options

Not knowing to ask the mortgage agent about all available loan products, terms and rates. Slight differences could actually save or cost you thousands of dollars. This is definitely a refinancing mistake you should avoid at all costs.