With mortgage rates once again on the rise, refinancing a mortgage is once again becoming a vogue topic. At City Creek Mortgage, we’re here to help if you determine that refinancing your mortgage is the best way to save yourself some cash and open up financial flexibility.
We’re also here to make sure you don’t fall into one of the few traps of refinancing. There are a few mistakes some people make during this process that turn it from a positive financial event into a negative one – here are some of these mistakes, and how to avoid them.
Home prices have climbed back to reasonable levels after the housing bubble collapse last decade, but that doesn’t mean you can afford wild assumptions about your home’s value. Overestimating value can torpedo a refinance before it gets started – you have to do lots of budgeting based around this number, and you need to have 20 percent equity in the home before refinancing is typically approved. If needed, speak to real estate agents in the area or check online to get a feel for what similar properties are selling for.
Refinancing is often about getting a better rate, but it can also be about changing your loan term. There are 15-, 20- and even 30-year loan options available, and you need to have an idea of which one makes the most sense for you – a longer term means more interest but lower payments monthly, while a shorter term means less interest and faster payoff, but higher payments. In some cases, an online mortgage calculator can help you determine which option fits your budget.
Waiting to Lock In
It can be tempting to hold out for that lowest rate possible, but this can backfire too. If you miss out and rates start to climb, you could be looking at a bigger jump than you might think. Once you get a rate you’re comfortable with, confirm with your lender and lock in the rate right away. You’re safe if rates go up, but you can always refinance again later if rates drop again.
Never forget about closing costs! All that money you might be saving through refinancing could disappear in a hurry through loan origination fees, application fees, appraisal fees, title fees and any attorney fees. Make sure these are built into your refinancing situation.
Want to learn more about refinancing mistakes to avoid, or interested in any of our other mortgage services? Speak to the brokers at City Creek Mortgage today.