What are the most common mistakes when
refinancing?
The seven most common refinancing mistakes are:
-
Refinancing
with your existing lender - Your existing lender may not have the best rates and programs.
There is a general misconception that it is easier to work with
your current mortgage company. In
most cases your current mortgage company will require the same
documentation as other companies because most loans are sold and have
to be approved independently. So
even if you have been very good at making payments to your existing
lender, they will still have to do their verifications all over again.
-
Not
completing a break-even analysis - Find out what the total
cost of the refinance is, and then figure out how much you will save
every month. Divide the total
cost by the monthly savings to get the number of months you will have
to stay in the property to break-even on your refinancing costs.
Example: if your refinance costs $2,000 and you save $50/month your
break-even is 2000/50 = 40 months.
You should refinance if you plan to stay in the house for at
least 40 months.
-
Not
getting a written estimate of closing costs - Your lender is required to provide you with a written good faith
estimate of closing costs within 3 working days of receiving the
application.
-
Using
the tax assessor’s value to value of your house
- Mortgage companies do not use the tax assessor’s value to
determine whether they will make the loan. Instead they use a market
value appraisal, which may be very different from the assessed value.
-
Not
providing documents in a timely manner -
When your mortgage company asks you for additional paperwork,
provide it as quickly as possible. They are trying to get you
approved, not hassle you unnecessarily! Many borrowers do not respond
to documentation requests quickly and end up paying higher rates.
-
Not
getting a rate lock in writing - When a mortgage company tells you they have locked your rate, get
a written statement, which details the interest rate, the length of
the rate lock and details about the program.
-
Getting
a 2nd mortgage before you refinance your 1st mortgage - Many mortgage companies
look at the combined loan amounts even when they are refinancing the
first mortgage. If you plan on
refinancing your first, check with your mortgage company to see if
getting a second will cause your refinance to get turned down.
Landmark Mortgage
specializes in assisting individuals with obtaining a home loan whether for purchase or refinance.
We can advise you on the best
approach and help you get the house of your dreams!
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