Mortgage Refinancing - Costly Mistakes You Need to Avoid

If you are in the process of mortgage refinancing there are a number of costly mistakes that can lead to overpaying for your new loan. Qualifying for a new mortgage in today's economy is easy; however, if you do not refinance correctly you could overpay thousands of dollars in unnecessary interest and junk fees. Here are several tips to help you avoid costly mistakes when mortgage refinancing.

I. Mortgage Refinancing: Always Shop Around

Many homeowners make the mistake of accepting the first mortgage refinancing offer they receive. If you neglect taking the time to research lenders and their offers, you will have no idea what fair interest rates, fees, and closing costs are. Choosing the first mortgage approval you receive could cost you thousands of dollars. When shopping for a new mortgage it is important to review all aspects of any loan offer; some homeowners assume choosing a mortgage with the lowest interest rate is the best deal. These homeowners often overlook lender fees and closing costs when mortgage refinancing.

II. Mortgage Refinancing: Choose the Right Loan Type

Another common homeowner mistake is choosing the wrong type of loan when mortgage refinancing. There are loan packages available for every financial situation; however, if you choose a risky adjustable rate mortgage without fully understanding the loan, you could end up with an unmanageable monthly payment. If you have a low tolerance for financial risk, choosing a traditional mortgage with a fixed interest rate could be your best option.

III. Mortgage Refinancing: Cost vs. Savings Comparison

Before committing to mortgage refinancing you should perform a cost vs. savings analysis to determine if mortgage refinancing is right for you. Because you will be required to pay many of the same expenses you did when taking out your original mortgage loan, it will take you time to recoup these expenses. You can use a simple mortgage calculator to determine the new monthly payment and how long it will take you to recoup your mortgage refinancing expenses based on the lower payment amount. Once you have determined your cost and potential savings you will be able to determine if mortgage refinancing is right for you.

To learn more about mortgage refinancing while avoiding costly mistakes, register for a free mortgage guidebook.

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