Mortgage interest rates are the lowest they’ve been in years and perhaps you’re
wondering if it’s time to refinance your loan. Lenders advertising their refinancing
services make it sound as easy as filling out a form and paying less each month.
While refinancing does not need to be complicated, here are 5 common mistakes
that could cost you thousands of dollars over the course of the loan. Refinancing
can be a great experience if you can avoid making these mistakes.
1. Not Shopping Around – Not all loans are structured the same. It’s
important to compare your options. Even loans with the same interest rate
can have different costs, fees, and terms.
2. Shopping for Too Long – Interest rates change quickly and, in this volatile
market, it’s possible to lose a great interest rate by looking for too long.
Consider getting three different loan options at the same time and
choosing the best option out of those three to work with.
3. Adding Years to Repayment – Interest rates are not the only consideration
in deciding to refinance. If you are 7 years into a 30-year loan, restarting
the clock with a new 30-year loan can cost you thousands of dollars. Never
refinance with a longer-term than your current status.
4. Not Considering Your Job Stability – The pandemic has created instability
in the job market; consider your employment situation carefully before
using precious savings for loan costs. Additionally, if you are moving from a
30-year loan to a 15-year loan, your payment might go up. Make sure you
have the income to comfortably pay that increase each month.
5. Assuming Your Credit is Great – Before looking for a refinance, check your
credit score and make any adjustments before you get a surprise at closing.
This is a great time to reduce your mortgage interest rate, while rates are low.
Consider all the aspects of the refinance offer first and make sure you get the best
option to save money.