What Went Wrong with My Home Refi?
Refinancing is a great way to take advantage of lower interest rates and better terms to ultimately save money and time on your mortgage. But just as there are some key things you need to know before you sign the dotted line of a mortgage, there are also some important points you must consider when refinancing your home.
Keep your eyes wide open and avoid these top mistakes people make when refinancing:
Not Conducting a Break-Even Analysis: The break-even period for a refi is the time it takes for the savings of a refinance to offset for the cost of the loan. And if you don’t crunch the numbers, you could be singing the blues if you are making plans for your savings.
To calculate the break even period all you need do is divide the total loan amount by the monthly savings you’ll enjoy. This will give you the number of months it will take to break even on the cost you incurred to refinance.
Choosing the Wrong Lender: As with a mortgage, credibility counts with the lender you choose, so do your homework here too and pick a lender that provides not only low rates but also a good track record. Check Internet forums for complaints about your broker or lender and ask your contact questions about the information you find. It can come back to bite you on the butt if you neglect this important aspect of the refi process.
Not Obtaining A Good Faith Estimate: You don’t want to be surprises once you get to the closing table. After you have the completed loan documents, ensure you get a good faith estimate from your lender. It documents an estimation of costs and mortgage companies are supposed to provide that in three business days of applying for your loan. The estimate will provide a detailed list of fees and costs associated with your new loan. Don’t get blindsided when it’s time to close the loan.
Not Reading Closing Documents Thoroughly Before Signing: Many homeowners are guilty of this mistake. And it sounds simple, but signing the document only after being fully aware of the terms and conditions is the ONLY way to proceed with a refi safely. If necessary, have a real estate attorney there to explain anything you don’t fully understand.
It’s essential you understand the new agreement you’re entering. Again, blindsides are not fun at any point in the refi process.
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