By Melissa Wirkus
Refinancing your current mortgage can save you a lot of money over time;
you just have to make the right decisions along the way. There are many
reasons to refinance, including getting cash-out or just getting a lower
monthly mortgage payment.
Regardless, the goal of a refinance transaction is to save money. If
you are not careful and educated about mortgages, you could end up wasting
money in your refinance.
A recent article posted on refinance.versabrands.com, “How you
can avoid the top 5 refinancing mistakes!” gives some pertinent
advice on this often-times confusing transaction.
The first thing to do when going about a refinance
is too choose the best loan for your situation. This means doing your
research. Failing to choose the best loan is probably the number one
mistake made by borrowers.
“There is more than one refinance loan out there. There are fixed-rate
loans, adjustable rate refinance loans, hybrid loans, etc. The loan
that is best for you is going to depend on your situation. For example,
in some cases a 15-year term is better than a 30-year term and vice-versa.”
You can start by doing your research right from the comfort of your
own home by
utilizing one of the many “Online Mortgage Calculators”
that are available on the Internet; they will give you a good idea of
what mortgage program to focus on.
This also includes choosing between a fixed-rate mortgage and an adjustable-rate
mortgage. Both of these programs have their benefits, so it is best
to research which one is best for you.
Next, you should make sure your refinance will help you to save money
and that you will at least “break even.” To do this, just
divide the total cost of the loan by the monthly savings. This will
let you know the number of months you need to stay in the house in order
to realize a savings.
Paying too much for mortgage
insurance, or PMI, is one huge mistake that many ‘refinancers’
make.
“But you don't have to pay PMI if you have an 80% equity stake
in your home. If you refinance at less than 80%, then you could wind
up paying too much for PMI. So, if you already have 80% invested in
your home you should not refinance below that level. In other words,
don't cash out above the 80% level.”
The last mistake not to make when refinancing is not shopping around
for different refinance lenders. Even though your past lender may have
done a great job on your mortgage, you should still shop around for
the best rates.
“For convenience, a lot of people simply refinance with their
current lender. This can be a mistake because your current lender may
not have the best rates. And your current lender may not be able to
offer you all the refinancing programs available. Some people think
that it is easier to deal with your current lender, but the truth is
that the refinancing process is the same for all lenders.”
In short, be smart about the refinance process and do your research
and shop around!!