Yes. Mortgage interest rates are rising. That is exactly why many homeowners are scrambling for a refinance before the new highs strike. But what many don’t realize is the possible negative feedback of a refi. Not all refinancedeals could turn out beneficial for you. When you get stuck with the wrong deal, you could end up paying more than you should.
To avoid this, exercise the following cautionary measures to filter the best refi deal from your options:
Take ads with a grain of salt
It’s not that it’s impossible, but advertised ads maximize the appeal value of their advertised information with the best of possible scenarios in mind. Yes, you can get that 4 percent interest, given you have excellent credit, very low to no debt, high home equity, or a good income. If one of these is problematic, recalibrate your expectations. Expect that ads won’t live up to reality. But that should not discourage you from still trying. Most lenders will work with you to obtain the refi setup that fits your needs.
Do your own homework
Make a rate comparison online, utilize free tools to arrive at closing estimates, and look for other lenders who have good refi deals besides your current one. You do not have the feel pressured to do repeat business with them. You hold total control as to who to transact with. After all, it’s your money and your investment.
Scrutinize fees
Always, always read the fine print. What are the fees that the lender asks you to pay? You can use these fees as criteria in choosing the best refi offer. Ask lenders about questionable fees and if there is room for negotiation. You can easily pay thousands more on closing by not looking out for hidden charges.
“Am I saving money?”
Closing costs can cost you around 3 to 6 percent of the loan amount. Use this number to calculate the breakeven point or the amount of time that it will take you to earn back that cost. If you are leaving the house or moving before you earn this cost back, keeping your existing mortgage rather than refinancing might be the better decision.
No costs does not mean zero cost
The lender could put this cost in the form of say, a higher interest. In the business world, nothing is free. The businessmen will always protect their business interest. A no-cost refinanceis just a strategic form of getting people to do business with them.
Remember that by refinancing, you are basically restarting your mortgage clock and paying your mortgage from square one. That is why you should put extra care and thoroughness when finding the best refi deal. Use this checklist and see to it that your last option is the best decision to settle on.
