When it comes to house mortgages, if you’ve been seriously considering refinancing yours, you are certainly not alone.
The reality is that as the economy shifts and interest rates change, many people find themselves looking for all kinds of ways to save on their house loans. One of them is by refinancing.
What this basically means is that you are choosing to approach a lender in order to apply for another loan. However, before you can be approved, you have to go through a similar process as you did with your first house loan. You have to show proof of employment, your family income and also share any outstanding debt that you might have.
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The reason why refinancing your home can work in your favor is that if you are able to get a good deal with your lender, it could save you money on your monthly payments. This leaves you with money to pay other bills or save up for your children’s college education or your retirement.
Of course, in order for the refinancing process to go smoothly, it’s a good idea to that you know about some of the common home refinancing mistakes that many homeowner make as well as how to avoid them. We have provided you with a list of five of them below:
#1: Failing to do enough research.
By far, one of the biggest mistakes that homebuyers make is failing to do a thorough amount of research when it comes to refinancing. Our recommendation? Start with speaking to your bank about the kind of refinancing that they feel would work best for your budget. The more knowledge you have, the better equipped you will be to make a wise refinancing decision.
#2: Overestimating how much your home is actually worth.
Being that you are refinancing, there’s a pretty good chance that you have lived in your house for a few years. This means that unless you have done some major renovations, there’s a significant chance that it has depreciated; at least a little bit.
So consider having an appraiser come and inspect your house. That way, you can get a more realistic estimate of what your home is actually worth before applying for a second loan.
#3: Not looking at the big picture.
Another mistake that homeowners make when refinancing is only focusing on what the interest rate is when it comes the loan. But the reality is that there are also lender fees and specific terms that they have with their loans.
So, make sure that before you sign on the bottom line, you review all of the details. That way, you won’t be caught surprise.
#4: Being unclear about the documentation that is needed.
Although the lender already knows all of the documentation that you are required to have, if you don’t as well, it could delay the closing process on the loan.
#5: Forgetting that there are shorter-term loan options.
If you were to consult with a couple of financial companies or mortgage bankers about a common mistake that people make when attempt to refinance their home loan, one of the things that they might mention is that many individuals fail to remember that they can also apply for shorter-term loans.
For instance, if you applied for a 15-year fixed-rate loan rather than a 30-year one, you could pay your house off a lot quicker and significantly reduce your interest in the process. That would result in a refinance decision that you definitely won’t regret.