Refinancing: Avoid The Top Errors Made

Whether you secure a loan with a new mortgage company or the same lender who has your current loan, you have to start all over again. This means that you have to fill out an application, get your home appraised, get an updated title report, and pay closing costs.

Just as you did with your original mortgage, you need to shop around for the best rate. Determine what your finances can handle - a 15 year or 30 year loan.

When many people start out in a home, they go with an Adjustable Rate Mortgage (ARM), which most often changes annually although some change only every three years. When you look at refinancing, you should look into getting a Fixed Rate Mortgage (FRM) that will lock you into a non-changing loan. In other words, your payments will remain the same over the life of the loan.

Next, find out if your lender will be charging you any up-front points. Remember that each point equal to one percent of the loan amount. If you were to borrow $100,000, each point would cost $1,000.

Work with your lender to determine the amortization so you know exactly what your monthly payments will be.

If you plan to stay in the house for sometime, it makes more sense to go with a lower interest rate and add the point or points you need to pay on the new loan. Keep in mind that points on refinance loans are usually not tax deductible unless the purpose of the loan is to pay off improvements made to the house.

Locking into a 30-year fixed rate at a lower interest rate has a lot of merit and is a great consideration.

If you don’t plan to stay in your home more than three years, and you can lock into an adjustable rate for less than 6%, it would make more sense to go this route.

If you’re not sure which way to go, sit down with several lenders as well as a financial advisor and have them look over the figures with you.

There are many different reasons for refinancing a house. Lower interest rates are just one of them. Other reasons might include going through a divorce, education needs, debt consolidation (getting credit cards and other bills paid off).

You’ll hear it descried as a slow market, or a buyers market. But it all means the same thing. That home sales in the local area, or market are slow. That there are too many homes for sale and not enough active buyers.

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Palatine, Rolling Meadows, Arlington Heights, Barrington, South Barrington, North Barrington, Barrington Hills, Inverness, Hoffman Estates, Schaumburg, Mt. Prospect, Prospect Heights, Buffalo Grove, Long Grove, Lake Zurich, Wheeling, Mundelein, Kildeer, Deer Park, Des Plaines, Elk Grove Village, Streamwood, Lake Barrington, Park Ridge, Northfield, Northbrook, Carol Stream, Wood Dale, Bensenville, Rosemont, Downers Grove, Lombard, Bartlett, Hanover Park, Deerfield, Glenview, Skokie, Glencoe, Winnetka, Evanston