3 Mistakes People Make When Refinancing

Why spend precious time looking for other refinancing deals when your first offer is pretty good? The answer: thousands of dollars. Yes, shopping around and negotiating takes time, but saving a few thousand dollars, or even more, sounds good too. Begin with your current lender. Ask for the best interest rates possible, but also request reduced or waived fees on such expenses as title searches and inspections. A lender eager to keep your business might just do it, especially if your current mortgage is from the past few years. When you shop around, do so on the same day because interest rates change daily. Remember to look at fees and points as well. Tell lenders you’re looking for the best deal, and don’t be afraid to negotiate.

Because mortgage rates fluctuate, the rate a lender quotes won’t necessarily be the rate you get when you close. Lock in your rate to avoid nasty surprises, and get the agreement in writing. Otherwise, your refinance could end up costing more than you would have saved. Also, when you lock in your rate, create room to work with in case a closing delay occurs. For instance, if your rate is good for 30 days, close your refinance as early as possible in that 30-day window.

Monthly payments dropping by several hundred dollars are a good reason to cheer, right? Not exactly. If you’re 10 years into a 30-year mortgage, and you refinance for another 30-year mortgage, you’re likely costing yourself much more in the long run. In such a scenario, consider a 15-year refinance. Even if monthly payments are higher, you’ll have the loan paid off in 15 years.

Starting over with the same mortgage length might only make sense if your current loan is recent, and interest rates are drastically lower. Calculate your break-even point to see when your refinance starts paying for itself.