Mortgage Refinancing - 3 Costly Mortgage Mistakes You Need to Avoid

Mortgage Refinancing can save you a lot of money if you go about it correctly. Overpaying when mortgage refinancing is a common homeowner mistake that will cost you thousands of dollars in unnecessary lender fees and mortgage interest. Here are 3 tips to help you avoid expensive homeowner mistakes when mortgage refinancing.

Mortgage Refinancing Mistake #1: Not Checking Your Credit Reports

The mortgage rate you qualify is based on your credit score. Your credit score is based on the contents of your credit reports. You actually have three credit reports maintained by three separate credit reporting agencies. These credit reports are frequently prone to mistakes as you have dozens of hands in your records throughout the year. Request copies of your credit reports from each of the credit reporting agencies and carefully review these records for any mistakes.

Mortgage Refinancing Mistake #2: Choosing a Bad Lender

If a mortgage lender asks you to sign blank or incomplete documents when mortgage refinancing, consider this a bad sign of things to come. If you sign blank or incomplete loan documents the mortgage company could fill in whatever they like and you've already agreed to their terms. Also, if the mortgage company asks you to exaggerate your income you're asking for trouble. Avoid any mortgage company that asks you to falsify information or sign blank documents.

Mortgage Refinancing Mistake #3: Not Negotiating for Fees and Rates

Closing costs and lender fees vary widely from one mortgage lender to the next. Carefully compare costs and fees using the Good Faith Statement and question any fees that seem unreasonably high. Ask your mortgage company or broker to see the original interest rate guarantee from the wholesale lender and compare it to the written guarantee you received. Comparing these guarantees will help you avoid any retail markup or Yield Spread Premium of your mortgage interest rate.

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Mortgage Refinancing With a Broker: Costly Mistakes to Avoid When Refinancing With a Mortgage Broker

If you are considering mortgage refinancing with a mortgage broker, there are a number of things you need to know before signing an agreement. Mortgage brokers can be an excellent resource for finding competitive mortgage refinancing offers; however, you need to be careful to avoid overpaying for the mortgage broker's services. Here are several tips to help you avoid costly mortgage refinancing mistakes when working with a mortgage broker.

Mortgage Refinancing: What Are Mortgage Brokers?

Mortgage brokers are a third party retail outlet for securing mortgage refinancing loans. When mortgage refinancing it is important to understand the how the retail mortgage market works. With the exception of banks and broker-banks (which you should avoid altogether) the retail mortgage market is made up of mortgage companies, online web portals, and mortgage brokers. These retail outlets all work basically the same; mortgage brokers sell mortgages for wholesale mortgage lenders for a commission.

Mortgage Refinancing: How Do Mortgage Brokers Operate?

When you apply for a mortgage loan from a mortgage broker the wholesale lender qualifies you for a certain interest rate and provides the mortgage broker with a written guarantee of that interest rate. The mortgage broker will turn around and reissue the mortgage refinancing interest rate guarantee in their company's name. Do you think the guarantee you receive is the same as the one that came from the wholesale lender? If you said "No!" give yourself a gold star. Mortgage brokers always mark up the interest rate the wholesale lender qualified you for. The wholesale mortgage refinancing lender may have qualified you for a 6.0% loan; however, the mortgage broker marked it up to 6.75% on your interest rate guarantee.

Mortgage Refinancing: What is Mortgage Broker Yield Spread Premium?

The markup your mortgage broker slips into your interest rate when mortgage refinancing is called Yield Spread Premium. Mortgage brokers are compensated with the origination points or fees you pay for mortgage refinancing. Yield Spread Premium is the icing on the cake for many retail mortgage outlets like mortgage brokers. By overcharging you for the interest rate, the mortgage broker receives an additional point for each .25% they mark up on the loan as a bonus from the wholesale lender. In the case above where the wholesale lender qualified you for a 6% loan and your mortgage broker marked up the interest rate to 6.75%, that broker will receive three additional points as a bonus for ripping you off.

Suppose your mortgage refinancing loan was for $200,000, the mortgage broker would receive a $6,000 bonus for overcharging you. The overwhelming majority of homeowners never know they've been ripped off in this manner by the mortgage broker. How can you avoid paying this mortgage broker markup when mortgage refinancing? Homeowners that learn to recognize Yield Spread Premium can avoid paying the markup. To learn how you can avoid paying mortgage broker markup when refinancing your mortgage, register for a free mortgage refinancing guidebook.

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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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Mortgage Refinancing - Three Costly Mortgage Mistakes to Avoid

If you are refinancing your mortgage there are several costly mistakes that can cause you to overpay thousands of dollars for your new mortgage loan. Doing your homework and researching mortgage lenders will help you avoid the majority of mistakes homeowners make when mortgage refinancing. Here are several tips to help you avoid three common homeowner mistakes that will result in overpaying thousands of dollars for your new loan.

Mortgage Refinancing is an expensive process, even when done correctly. You will be required to pay fees and closing costs to secure the new mortgage refinancing loan. These costs typically run between 1-3%, not including any discount points you agree to pay in exchange for a lower interest rate or better terms. Many homeowners make the mistake of trying to time the market for a better mortgage refinancing interest rate, or assume by choosing the loan with the lowest interest rate they will save money. Here are tips to help you avoid making the same mortgage refinancing mistakes.

Mortgage Refinancing Mistakes: Trying to Time Interest Rates

Mortgage interest rates are extremely unpredictable. Any one telling you they can time interest rates to find you the best loan is not being completely honest with you. Many people try and time the market as a gimmick to sell their services; however, these people are just guessing based on what they see in the news. Instead of trying your luck at timing the market, you are better off using your time to research mortgage refinancing lenders and their loan offers.

The Internet makes doing your mortgage refinancing homework easy. You can quickly research dozens of mortgage lenders and compare mortgage refinancing offers line-by-line. When you comparison shop for a new mortgage it is important to compare all aspects of the mortgage loans you consider. Homeowners that focus only on mortgage refinancing interest rates make the next costly mortgage refinancing mistake we will discuss.

Mortgage Refinancing Mistakes: Assuming the Lowest Interest Rate is Best

Mortgage refinancing interest rates are important; however, interest rates are only one aspect of the new loan. Many homeowners think choosing the loan offer with an attractive interest rate will save them money. These homeowners often choose risky adjustable rate mortgages with unusually low introductory rates that go up significantly after a period of time, or will overlook mortgage refinancing lender fees and closing costs. Making either mistake will result in significantly overpaying for your home loan. In the case of that risky adjustable rate mortgage, you could even lose your home if you don't fully understand what you're getting into. To learn more about avoiding other costly mortgage refinancing mistakes, register for a free mortgage guidebook.

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