You might be considering whether now is the right time to refinance your loan. Lenders often make the process seem straightforward, promising lower monthly payments with just a simple application.. 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.
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.
Shopping for Too Long– Interest rates change quickly and, in this 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.
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.
Not Considering Your Job Stability– The pandemic create dinstability in the job market that we are still working on correcting; 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.
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.
A refinance can be a great way to reduce your mortgage interest rate. Consider all the aspects of the refinance offer first and make sure you get the best option to save money.
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