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8 Mistakes to Avoid When Refinancing a Mortgage Loan

A mortgage refinance can lower your monthly payments and decrease the amount of interest paid over the life of your home loan. But don’t just focus on mortgage rates without understanding everything involved with a refinance. Here are eight mistakes to avoid when refinancing a mortgage.

  1. Not shopping around for mortgages is a huge mistake. It’s imperative that you compare different deals to make sure you get the loan package that is right for your situation. Not all mortgage refinancing is the same so slow down and take your time.
  2. Not scrutinizing the Good Faith Estimate (GFE) of closing costs can come back to haunt you. Federal law requires that the GFE must be provided to you within three business days of applying for a loan. The document details all closing costs you can expect to pay for doing a mortgage refinance. Ask for GFEs from several mortgage lenders when shopping around so you’ll be able to compare mortgage loans.
  3. Settling for a verbal rate lock. Mortgage rates fluctuate, so protect your interests by getting in writing a rate lock that includes the interest rate and how long it lasts.
  4. Not understanding how long it will take to break even on a refinance. Use a loan calculator to determine when you’ll recoup the closing costs for refinancing. The calculator will allow you to input information from your current home loan and the refinanced loan to determine the break-even point.
  5. Dragging your feet on providing information to the mortgage lender can result in delays. Make sure that when your mortgage lender requests information from you, that you promptly reply.
  6. Using an existing home equity line just before applying for a mortgage refinance. Avoid tapping your home equity for at least six months before refinancing.
  7. Not understanding assessed versus appraised values. The assessed value is given by the local tax assessor. Appraised value is given by an appraisor who examines your home and comparable homes in the area to determine how much it is worth.
  8. Signing loan documents without reading through them. The process of closing on a mortgage can sometimes be rushed and confusing. But don’t let your loan officer push you into signing documents you don’t understand just to complete a deal. Ask for the paperwork ahead of the closing to have plenty of time to go through it.

A mortgage refinance should not be rushed just to take advantage of fluctuating interest rates. Get as many facts as you can before talking with mortgage lenders so you’ll have a list of questions to present to them.

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One Response to “8 Mistakes to Avoid When Refinancing a Mortgage Loan”

  1. s2kreno Says:

    excellent advice

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