How to Avoid the 7 Biggest Mistakes Refinance Shoppers Make

1. Make Sure of Your New Interest Rate

Make sure that you save enough to justify the process of refinancing. It is best to decrease your interest rate by at least .75% to 1%. For example, this will save you about $100.00 a month on a $150,000.00 mortgage.

2. Know Your Closing Costs Up Front

By law, closing costs must be disclosed within 3 days of the loan application, however, there are different approaches to calculating them. Closing costs are initially estimated until the details of your specific loan are clear. It is wise to use a worst case scenario and be pleasantly surprised.

4. Be Sure You Fully Understand Your Reason(s) For Refinancing

Some refinance simply to reduce their interest rate. You should be aware that simply reducing your interest rate is not always to your advantage, so make sure that the gains from your rate reduction more than cover the related fees. There are, however, other legitimate reasons to refinance that may not be related to interest rates. Some are debt consolidation, home improvements, or a major purchase. Some of these choices may offer other financial or personal advantages, such as taking cash out to buy a car. In this example, you may be able to deduct your interest payments on your tax return. Always consult an accountant or tax attorney before making these types of decisions.

5. Beware of "APR" Advertising

"APR" stands for Annual Percentage Rate. Some mortgage brokers use "APR" teaser rates to get your attention, however, they may actually end up costing you more. Such rates are often derived by using a 30 year mortgage coupled with an accelerated payment plan. Most lenders allow you to select such a plan, if you chose. Know your actual interest rate that you will be paying when comparing mortgages.

Should I Consider an Adjustable Rate?

Adjustable rate mortgages, or "ARM’s," can be very helpful in assisting people into the housing market. They can help minimize your monthly payment, however, in the long run they can cost you more money if additional refinancing occurs.

6. Beware of the Quality of Service Provided

You want your refinance to be accomplished with as little hassle and in the shortest period of time. Ask your mortgage broker details of their service plan and performance guarantees.

7. Not All Mortgage Brokers are Created Equally

Be sure to ask your mortgage broker about all their available loan products, terms and rates. A subtle difference can save or cost you thousands.

3. You should be thinking about your long term goals, and expected situation, to determine the type of mortgage that will best suit your needs

There are a number of questions you should be asking yourself before you commit to a certain type of mortgage. How long do you think you will own this home? What direction are interest rates going in, and how quickly? Is your income expected to change (up or down) in the near term, impacting how much money you can afford to pay to your mortgage? The answers to these and other questions will help you determine the most appropriate mortgage you should be seeking

4. Make sure you understand what prepayment privileges and payment frequency options are available to you

More frequent payments (for example weekly or biweekly) can literally shave years off your mortgage. Simply by structuring your payments so that they come out more frequently, will significantly lessen the amount of interest that you will be charged over the term.

For the same reason, authorized pre-payment of a certain percentage of your mort-gage, or an increase in the amount you pay monthly, will have a major impact on the number of years you will have to pay and could shorten your payment term considerably.

These two payment options can cut years off your mortgage, and save you thousands of dollars in interest. However, not every mortgage has these prepayment privileges built in, so make sure you ask the proper questions.

5. Ask if your mortgage is both portable and/or assumable

A portable mortgage, where available, is one that you can carry with you when you buy your next home and avoid paying any discharge penalties. This means that you will not have to go through the entire mort-gage process again unless you are making a move up to a much more expensive home.

An assumable mortgage is one that the buyer for your home can take over when you move to your next home. This can be a very powerful tool at the negotiating table making it much easier and more desirable for a buyer to buy your home, and again saves you any discharge penalties.

6.You should seriously consider dealing with a Mortgage Expert

Consider dealing only with a professional who specializes in mortgages. Enlisting their services can make a significant difference in the cost and effectiveness of the mortgage you obtain. For example they can make the process faster thereby avoiding costly delays. Typically there is no cost or obligation to enquire.

BretlinFloridaMortgage.com - Home loans from $100,000 to $15,000,000

Phone: 800-572-5964 or Email: glenn.keller@bretlinfloridamortgage.com

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