4 Mistakes That You Can Avoid While Refinancing Your Mortgage
In response to the economic depression in late 2008, the Federal Reserve was given the authority to spend a huge amount of money in the credit markets in order to bring down the mortgage refinancing rates. By doing this they will help the struggling homeowners to refinance their mortgages and pay them off in affordable monthly payments. With the increase in foreclosure rates in the US, more and more homeowners are turning towards mortgage refinancing. Have a look at the mistakes that you must avoid while refinancing your mortgage loan.

1. Not shopping around for the best rates:

Though refinancing rates have dropped considerably, it would still be wise on your part to shop around for different rates from different lenders. It often happens that your existing mortgage lender will want you to fill out new paperwork for refinancing your mortgage. In that case, it’s better to walk away to a new lender. Shaving one-eighth of a percent off your interest rate can save you thousands of dollars on your monthly payments. Thus, consider conducting comprehensive market research before settling with a particular lender.

2. Focusing only on the interest rate:

Although the interest rate is the main factor in deciding what your mortgage payments would be, concentrating only on the interest rate will not do. Closing costs are also to be taken into consideration. Closing costs vary from lender to lender, and a low rate may seem tempting apparently but it may be a come-on to a loan with high fees. Be sure that you inquire about the loan origination fees, points, and all other fees before applying for a loan.

3. Signing loan documents without properly reviewing them:

Check all the loan documents before you sign them. Do your homework before coming to the closing. You won’t get enough time to review those papers while you calculate the closing costs. So make it a point to review them in advance. Make your mortgage refinancing a success by checking all your documents before you add your signature to them.

4. High prepayment costs:

There are some loans that come with a prepayment penalty. You should find out how long this payment penalty period exists. If you’ve already planned to leave your house within a year and your prepayment penalty is for 2 years, you will have to pay the prepayment penalty in the future. Thus, make sure that you check such costs so that you do not have to pay them in the future.

Home Improvement

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