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There are common mortgage refinancing mistakes to avoid if you want approval and at the lowest mortgage rate.
The good news is that all these mistakes are preventable.
The many advantages of refinancing your mortgage might overshadow the many things you must consider before committing to the mortgage.
Knowing these mistakes will help you plan and get the right mortgage product.
Not considering possible mortgage options outside your bank’s mortgage solutions may cost you thousands of dollars per year in interest payments.
You should be open to other mortgage loan sources beyond your bank. It is now easy to search and compare mortgage loans across lenders online.
If your refinance reason is a lower monthly payment, then your focus should be on a lower mortgage rate solution, everything being equal.
A low mortgage rate will help you reduce your monthly payments.
The mortgage rate directly affects your monthly payment. All things being equal, the higher your mortgage rate, the higher your monthly mortgage payment.
With the same terms and options, a lower rate mortgage loan is preferable to a similar mortgage but with a higher rate.
You should check mortgage products from lenders like credit unions, trust companies, and monoline banks.
It might be the wrong time to refinance your mortgage loan. Market conditions like interest rates, housing supply and demand, and government policies might not favour a mortgage refinance.
In addition, your credit score and income may not be at their prime levels to qualify you for a low-interest rate mortgage loan.
It’s wise to consider these factors carefully when planning mortgage refinancing.
The solution is timing. You may have to wait for the market to correct itself to ensure quick approval at a reasonable mortgage rate.
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Emotions can blind you from the actual value of your home. Your emotional attachment may cause you to overstate your property’s market value.
Why is knowing the accurate market value of your house significant?
It helps in planning your mortgage refinance
You want to ensure the house has enough value to be worth the mortgage refinance. Nothing can be more devastating to all parties(yourself, your lawyer, your broker, and your lender) than investing time and resources in the process only to find that the appraised value comes in lower than estimated.
A simple way to estimate the property’s value is by looking at asking prices for similar homes in your neighbourhood on Realtor.ca.
You’ll avoid potential issues that could interfere with the mortgage refinancing process.
You don’t want to be a mortgage liar!
It is a bad idea to inflate your income and downplay your expenses when applying for any form of a mortgage loan.
As tempting as this might be, it is never a good idea to be a mortgage liar. Always be transparent with potential lenders and mortgage consultants.
After all, not only are you likely to get caught if the application isn’t accurate or factual, but it can also land you in some serious trouble.
If you have been following the recent headline news, it’s easy to see why many homeowners use mortgage brokers for their refinancing needs. After all, not only will these experts save you time and effort in completing the applications, but their knowledge, expertise, and contacts in the industry will likely provide you with more advantageous deals than you would have found by doing it yourself.
As a result, it’s well worth the effort to consider the services of a professional broker for a mortgage refinance. You’d be surprised how much easier the entire process will be with professional assistance.
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Refinancing your mortgage is an excellent financial move that will yield benefits.
After all, not only can it help you save money through a lower interest rate, but it can also help you cash out on your equity or consolidate your debts.
However, there are times when this recourse can be disadvantageous. By thinking through why you want to refinance in the first place, you will likely achieve the desired outcome, and you’ll be much better prepared to deal with any potential problems.
Let’s face it, refinancing costs money. Be prepared to pay an appraisal, lawyer’s, and title search fees. Consider lender fees and a possible brokerage fee if you’re going for an alternative mortgage loan.
Mortgage refinance cost is estimated to cost between 2% to 3% of the loan amount.
There’s hardly any point in doing so if the refinance’s long-term benefits won’t be more than the short-term cost.
So, before you even begin, ensure you check the costs associated with the process.
This way, you won’t get caught off guard by unexpected fees or additional expenditures that can delay or stop your mortgage refinancing.
Things can always go wrong, and mortgage refinancing is no exception. You don’t want to be left hanging. Whether it’s a sudden drop in the property value or a credit score less than ideal, the general rule of thumb says to always have a contingency plan in place in case things don’t go as planned.
Doing so might seem like extra effort, but saving you time and money can go a long way.
It’s critical to ensure your existing mortgage is paid to date before considering refinancing options. Not only will it be harder to find a lender if your mortgage has not been paid as agreed, but you won’t qualify for a favourable deal or better rate.
It certainly makes sense to settle any overdue payments with your current lender before seeking mortgage refinancing.
It’s easy to understand the appeal of mortgage refinancing. After all, it boasts several advantages that can bail you out of a tight spot.
However, it comes with its fair share of risks too. By avoiding the common pitfalls and mistakes outlined above, you’ll be able to maximize the benefits that mortgage refinancing offers.