5 Costly Mortgage Refinancing Mistakes to Duck

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Refinancing your mortgage has a number of advantages, but only if done properly. But, a few oversights might be expensive and put your property at risk. Here are five significant thoughts you must be aware of to forestall costly mortgage refinancing errors.

Oversight #1: Failure to lock in your rate

Mortgage rates are extremely erratic. Interest rates can be modified while your loan is being finalized. So if you failed to lock your interest rate in, you might be offered a different rate than what you've anticipated. Ask your lender to lock in the rate you are happy with; get it in writing and verify it when the finalizing of your loan is done. Take note: lenders will not lock in your rate without your request.

Mistake #2: Failure to get several quotes

There are many mortgage companies out there. Each lender will provide a loan, but there are differences you must recognize. This is why you have to consider several lenders to get the lowest rates. You may think that one mortgage provider is just like any other, but you should shop around for mortgages just like you would for a vehicle. Compare different companies and look for differences. Ask what the criteria are to get the most competitive mortgage rate. And if you believe you are not getting what you deserve, then move on to another provider.

Blooper #3: Refinancing too often

Refinancing can be a beneficial way to lower your interest rate and save on your monthly mortgage payments. But, don't try this every time interest rates go down. You need to be aware of how the fees to terminate a loan prematurely and originate a new loan influence your long term savings from the lower rate. These fees will counteract the reduced monthly payments for some months and may cost more overall than you save on lower monthly payments.

Oversight #4: Failing to compute your break even point

The charges you pay for your new loan is often overlooked by home owners seeking lower monthly payments.

Computing your break even point is easy. Suppose you refinance to save $200 a month on your mortgage payments and the fees you paid to refinance were $2000. The easiest thing to do is to divide your fees by your monthly savings and you will obtain the break even point ($2000/$200). You won't break even for 10 months and really won't see any savings until the 11th month. Are you ready to wait 11 months to realize any savings on your mortgage payments? This is also linked to #3.

You may already have refinanced your loan. If so, have you reached the break even point? If not, you ought to extend your calculated break even point to take your preceding refinance into consideration. What determining your break even point does is to inform you how long you have to remain in your house before you see any real savings.

Oversight #5: Refinancing just for the heck of it

Some people think that every time the interest rates go down that it's time to refinance. Often this belief does not work out to the advantage of the homeowner. As an intelligent homeowner, you should take into account a number of factors to conclude if refinancing is the correct choice for you.

Here are some suggestions for the incorrect times to refinance. Wait to refinance ...

... if you won't be living in your residence beyond the break even point
... if you have not been paying for your current mortgage for several years
... if you have only a few years left to pay for your home.
... if you have a bad credit score
... if the current market value of your house is declining
... if you have no equity left in your home

Steer clear of these mistakes and you can make refinancing your mortgage a happy experience.

Article Source: http://depositarticles.com/

Learn additional information about consolidation loans and more at Bob Sherman Credit

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