Warning: Do Not Refinance Your Home Until You Read This Report! - 5 Costly Refinance Mistakes.
Darren Meade
September 16, 2006
Mistake #1 – Refinancing only to obtain a lower interest rate
So why are you refinancing your mortgage loan? Are you trying to save money through a lower monthly payment? Are you trying to reduce your interest rate? Are you hoping to combine your refinance with a cash-out equity loan?
If you’re simply trying to find a lower interest rate, make sure you calculate the related fees and closing costs. These fees might make you rethink the process. Unless you can save enough money to easily cover these costs, refinancing may not be right for you.
Mistake #2 – Cash-Out Refi to Pay off Unsecured Credit Card Debt
Many people opt for what’s called a cash-out refi. This not only can save you money on your monthly mortgage payment, but can provide you with cash to pay off high-interest credit cards. We recommend that you review all of your options before choosing this path. Are you really desperate enough to get rid of your unsecured debt that you would consider putting your home on the line? Review other options first, like calling your creditors and asking them to reduce your interest rates and save your home equity for a rainy day. Remember, you can always refinance without having to touch your home equity.
WARNING: DO NOT SPEND THE MONEY ON YOUR CASH-OUT UNTIL THE LOAN FUNDS!!!
Once a week, we tell a borrower that the loan and terms they've been promised doesn't exist in the market. The borrower ignores are warnings and then when it is time to sign the loan documents, the key terms have changed (interest rate higher and usually a prepayment penalty) however, since they already spent the money they feel trapped and sign the documents anyway.
Mistake #3 – Not Asking About Points
In their simplest form, Points are up-front mortgage interest fees paid on a loan to reduce the initial interest rate. Points are fees the borrower pays the lender at the time of loan closing. If you pay one point (1%) on a $100,000 loan, then you will pay the lender $1,000 at loan closing, but will reduce your long-term interest rate, which will save you money throughout the life of your loan.
Some loan rates have points already built-in, so you need to make sure the lender is very clear on how many points are being charged.
Mistake #4 – Refinancing into an ARM or Interest-Only Loan
In some cases, it makes sense to refinance into an Adjustable Rate or Interest-Only loan. But be aware of the ramifications. While you might refinance into an ARM and initially save money; over the years, your interest rate may creep up and end up eating-up the refinance savings.
Interest-only loans are another popular option, but they’re not right for everyone. Interest-only loans are actually only “interest-only” for a short period of time, like 5-10 years. This means that eventually, your payment will start to include principal again, and if you can’t afford to pay the principal at that time, you might be forced to refinance again! Always plan long-term...
Mistake #5 – Not getting a Guaranteed Lowest Bottom-Line Cost
All lenders are required by law to provide what is called a Good Faith Estimate of Closing Costs. Use this “Good Faith Estimate” as a tool to find the lowest price. You should ask any lender you speak with for a guarantee that clearly states, in writing, that they have the lowest bottom-line closing cost. If they can’t provide you such a guarantee, in writing, you should find another lender.
We guarantee our refinance closing costs, in writing. As a matter of fact, we are so confident that we have the lowest refinancing closing costs that we’ll PAY YOU cold-hard cash if you can find a better deal elsewhere. For more information, schedule a pre-approval or application appointment with us now. At our appointment, we will give you a form that guarantees the lowest costs, in writing.
So why are you refinancing your mortgage loan? Are you trying to save money through a lower monthly payment? Are you trying to reduce your interest rate? Are you hoping to combine your refinance with a cash-out equity loan?
If you’re simply trying to find a lower interest rate, make sure you calculate the related fees and closing costs. These fees might make you rethink the process. Unless you can save enough money to easily cover these costs, refinancing may not be right for you.
Mistake #2 – Cash-Out Refi to Pay off Unsecured Credit Card Debt
Many people opt for what’s called a cash-out refi. This not only can save you money on your monthly mortgage payment, but can provide you with cash to pay off high-interest credit cards. We recommend that you review all of your options before choosing this path. Are you really desperate enough to get rid of your unsecured debt that you would consider putting your home on the line? Review other options first, like calling your creditors and asking them to reduce your interest rates and save your home equity for a rainy day. Remember, you can always refinance without having to touch your home equity.
WARNING: DO NOT SPEND THE MONEY ON YOUR CASH-OUT UNTIL THE LOAN FUNDS!!!
Once a week, we tell a borrower that the loan and terms they've been promised doesn't exist in the market. The borrower ignores are warnings and then when it is time to sign the loan documents, the key terms have changed (interest rate higher and usually a prepayment penalty) however, since they already spent the money they feel trapped and sign the documents anyway.
Mistake #3 – Not Asking About Points
In their simplest form, Points are up-front mortgage interest fees paid on a loan to reduce the initial interest rate. Points are fees the borrower pays the lender at the time of loan closing. If you pay one point (1%) on a $100,000 loan, then you will pay the lender $1,000 at loan closing, but will reduce your long-term interest rate, which will save you money throughout the life of your loan.
Some loan rates have points already built-in, so you need to make sure the lender is very clear on how many points are being charged.
Mistake #4 – Refinancing into an ARM or Interest-Only Loan
In some cases, it makes sense to refinance into an Adjustable Rate or Interest-Only loan. But be aware of the ramifications. While you might refinance into an ARM and initially save money; over the years, your interest rate may creep up and end up eating-up the refinance savings.
Interest-only loans are another popular option, but they’re not right for everyone. Interest-only loans are actually only “interest-only” for a short period of time, like 5-10 years. This means that eventually, your payment will start to include principal again, and if you can’t afford to pay the principal at that time, you might be forced to refinance again! Always plan long-term...
Mistake #5 – Not getting a Guaranteed Lowest Bottom-Line Cost
All lenders are required by law to provide what is called a Good Faith Estimate of Closing Costs. Use this “Good Faith Estimate” as a tool to find the lowest price. You should ask any lender you speak with for a guarantee that clearly states, in writing, that they have the lowest bottom-line closing cost. If they can’t provide you such a guarantee, in writing, you should find another lender.
We guarantee our refinance closing costs, in writing. As a matter of fact, we are so confident that we have the lowest refinancing closing costs that we’ll PAY YOU cold-hard cash if you can find a better deal elsewhere. For more information, schedule a pre-approval or application appointment with us now. At our appointment, we will give you a form that guarantees the lowest costs, in writing.
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