Mistakes when it comes to your mortgage can cost you a lot of money. Becoming a smart mortgage comparison shopper will help you avoid making these mistakes. Here are several tips to help you avoid making common mortgage mistakes that can cost you thousands of dollars.
The biggest mistake homeowners make is neglecting to shop for the best loan by researching interest rates and lender fees from a variety of mortgage lenders. Here are the most common mistakes homeowners make when it comes to refinancing a mortgage.
Timing Interest Rates
Interest rates are extremely difficult to predict. If someone tells you they can guarantee interest rates will go up or down at some date in the future they are simply speculating. Your time is better spent researching mortgage lenders than forecasting interest rate changes.
The Internet is an excellent tool you can use to easily compare the interest rates and lender fees advertised by mortgage companies. You can collect no-obligation quotes from lender websites to help you choose the best mortgage for your situation.
Not Comparing Interest Rates
Mortgage interest rates vary widely from one lender to the next. Every mortgage company sets their own interest rate with their own markup. This is why you will see a difference in the advertised interest rates when shopping for your new mortgage. Mortgage lenders also evaluate your credit differently; this is how they determine the interest rate you qualify for based on your financial situation. Because of this it is important to request rate quotes to determine the difference between what the lender is advertising and what your individual interest rate will be.
Assuming Refinancing Will Save You Money
There are costs associated with refinancing your mortgage. If you are receiving a better interest rate on your new mortgage it could take as long as 2-3 years to recoup the expenses of refinancing your mortgage. Mortgage loans are also front loaded with interest; this means the majority of your monthly payment is applied to interest in the early years. You will build very little equity in your home while this interest is being paid.
There are ways to increase your savings. If you refinance your mortgage to a loan with a lower interest rate and a shorter term length, your savings over the life of the mortgage will dramatically increase. Before you sign up to refinance your mortgage make sure you understand what your savings will be and how long it will take you to recoup the costs of refinancing your mortgage. Spend a little time doing your homework to find the right mortgage for your situation and you will save yourself thousands of dollars in finance charges. You can learn more about saving money on your mortgage and avoiding mistakes by registering for a free mortgage guidebook.
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