Interest rates on mortgage are at record low levels and should remain that way as long as economics continues to be unsatisfactory. Nonetheless, if you have been reflecting on mortgage refinancing, you should do it instantly.
But don’t you make mistakes in your hurry to refinance. There are five of the biggest ones here, according to a survey of LendingTree network lenders.
1. Overestimating the home value. Notwithstanding the fact that home values continue to drop, homeowners still tend to over-value their home. As a result, they obtain higher-than-expected mortgage offers.
2. Hesitating to lock in low rates. Lenders are seeing borrowers waiting for rates to drop further, missing out on the possibility to lock-in with the existing low rates.
3. Focusing only on interest rates. Borrowers usually forget to factor in lender fees, mortgage terms and lender status into their decision to refinance. Compare several offers and run all the numbers (including fees) using calculators to see which offer is the best for you and to reveal whether mortgage refinancing is even necessary for you.
4. Neglecting shorter-term mortgages. Remember, the 30-year mortgage isn’t your only option. A 20-year or 15-year loan can shorten the life of the mortgage and reduce considerably the amount of interest paid.
5. Not knowing what documents are required to refinance. If you haven’t taken out a mortgage or refinanced recently, you might not know that you need a much more documentation these days to get a mortgage. Be ready to provide pay stubs from a recent month, two months of bank and other financial statements.
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