How To Avoid The 7 Biggest Mistakes Refinance Shoppers Make

The word count for this e-newsletter is: 460; Approximate time to read: About 2.5 - 3.0 minutes.

Refinancing can be very stressful and costly if you don’t take the time to do your homework. We simplified the process by helping you avoid these mistakes shoppers make in refinancing.
1. Is Your New Interest Rate Low Enough

Make sure that you savings on the new interest rate is low enough to justify the process of refinancing. It is best to decrease your interest rate by at least .75% to 1%. For example, this will save you about $100.00 a month on a $150,000.00 mortgage.

2. Know Your Closing Costs Up Front

By law, closing costs must be disclosed within 3 days of the loan application; however, there are different approaches to calculating them. Closing costs are initially estimated until the details of your specific loan are clear. It is wise to use a worst case scenario and be pleasantly surprised.

3. Be Sure You Fully Understand Your Reason(s) For Refinancing

Some refinance simply to reduce their interest rate. You should be aware that simply reducing your interest rate is not always to your advantage, so make sure that the gains from your rate reduction more than cover the related fees. There are, however, other legitimate reasons to refinance that may not be related to interest rates. Some are debt consolidation, home improvements, or a major purchase. Some of these choices may offer other financial or personal advantages, such as taking cash out to buy a car. In this example, you may be able to deduct your interest payments on your tax return. Always consult an accountant or tax attorney before making these types of decisions.

4. Beware Of “APR” Advertising

“APR” stands for Annual Percentage Rate. Some mortgage brokers use “APR” teaser rates to get your attention; however, they may actually end up costing you more. Such rates are often derived by using a 30 year mortgage coupled with an accelerated payment plan. Most lenders allow you to select such a plan, if you chose. Know your actual interest rate that you will be paying when comparing mortgages.

5. Should I Consider An Adjustable Rate

Adjustable rate mortgages or “ARM’s,” can be very helpful in assisting people into the housing market. They can help minimize your monthly payment, however, in the long run they can cost you more money if additional refinancing occurs.

6. Beware Of The Quality Of Service Provided

You want your refinance to be accomplished with as little hassle and in the shortest period of time. Ask your mortgage broker details of their service plan and performance guarantees and make sure you get them in writing.

7. Not All Loan Officers Are Created Equally

Be sure to ask your mortgage loan officer about all their available loan products, terms and rates. A subtle difference can save or cost you thousands.

Finding The Right Home Loan Has Never Been Easier!

As the #1 most recommended mortgage professional by local realtors, CPAs and lawyers in the southern New Jersey and Philadelphia area, we specialize in finding ways to say “yes"!

Whether you’re dealing with a new home buyer or an existing home owner, a credit superstar or credit challenged – Custom Mortgage Solutions has hundreds of home loan options.

Call today and we can discuss their loan needs sooner vs. later.