Refinancing Mistakes to Avoid
Thinking about refinancing your home? Funding Options’ Dom Cassisi helps you look out for a few common refinancing mistakes.
Debt has a funny way of piling up behind your back. In light of changes in the economy, housing market and lending rules, you may be very tempted to refinance.
Refinancing can be a great solution for getting your costs down.
But you also need to watch that you don’t make any of these very common refinancing mistakes.
1. Getting a longer-term loan
Crunch the numbers before you agree to a new loan term. Make sure that what you’ll pay out in interest over those years will be less than what you’re currently looking at.
It’s easy to conclude a new loan is better simply because it comes with a lower interest rate. But that interest will still add up if you have to pay it for the next 30 years, for example.
Remember: if you’re good about making steady, weekly repayments, you can ultimately chop years off of your mortgage.
2. Falling for advertising
Lenders like to attract new borrowers by offering special interest rates for a limited time. That initial offer has some appeal, but don’t go by that, alone.
Check out the lender’s regular rates to get an idea of what you’ll have to pay once the introductory offer expires. And consult an experienced mortgage broker, who can read between the lines and see through the sales pitch.
3. Sticking with the big names
Don’t feel like you have to only borrow from the biggest and most reputable banks. Smaller lenders can give you the same calibre of service and at more reasonable rates. It doesn’t hurt to research other options in your area for refinancing your mortgage.
4. Failing to count the cost of switching
A lower interest rate is what you may primarily be focused on. But you can’t afford to ignore the fees that may come with dropping your current loan plan and jumping on board with another. If anything, your new loan may come with surprise fees itself. Talk to your broker about getting the potential new lender to waive the initial fees to secure your business.
5. Trying a new product with the same lender
Your issue may not lie with your loan structure so much as with your lender. Work with your broker to cast the net out wide – give other institutions a fair try, research, ask questions and keep an open mind as to your options.
6. Refinancing to resolve debt incurred but uncontrolled spending
If you can’t successfully manage a little credit card debt right now, then refinancing could be a disaster that piles on even more debt. Don’t use refinancing as a means to escape consequences. Work on improving your spending habits, first.
7. Making a decision solo
Too many borrowers decide to just go for it and accept the consequences. In reality, there’s no need to take that much risk in refinancing. All it takes is a quick phone call to an experienced mortgage broker to access all the advice you need.
Need some advice? Arrange a free, no obligations discussion with Funding Options.
– Dom Cassisi, Managing Director