There are a couple of good reasons to refinance your home. You may need cash to deal with a large expense, like major home renovations or sending your child to college. Or you may simply want to trade your current loan in for one with more favorable terms. Either way, refinancing can be a smart move if you go about it the right way. However, there are certain refinancing mistakes that could leave you regretting the refinance down the road. Take a look at a few refinancing mistakes that you should take care to avoid.
Failing to Comparison Shop
If you're looking to refinance, it makes sense to start with the bank that currently holds your mortgage. After all, you already have a relationship with them, and that can work in your favor when trying to get a good rate. But there's no guarantee that your current mortgage holder is going to give you the best rate.
Don't settle for the first offer you get – check with several banks and see what kind of offers are out there. If you really prefer to work with your current bank, but you find a better offer somewhere else, get it in writing and take it to your bank to see if they'll match it – they may do so if they want to keep your business. But definitely don't settle for a less-than-optimal deal because of loyalty to the bank you're already using.
Failing to Make a Mortgage Payment During Escrow
On the surface, withholding your regular mortgage payment during the escrow period can seem like it makes sense. After all, pretty soon you're going to have a whole new payment, possibly to an entirely new lender. If the escrow period ends right after you make your payment, won't your old mortgage company get an over-payment if you pay your regular mortgage and then the new lender closes on your loan?
Here's the problem with that – if it takes a bit longer than you expect for the new loan to close, you now have a late payment on your credit report. That could be enough to increase your new refinance rate. Even if it doesn't, it could hurt your credit score and that could affect the next purchase you need to make on credit. Just make your mortgage payment like you always do. Your lender will reimburse you if you overpay, and that way you won't do any damage to your credit score.
Using the In-House Appraiser
You should have the option to hire your own home appraiser to determine the value of your home. Using the lender's appraiser should be seen as a conflict of interest. You need an appraiser who is completely neutral to be sure that you're getting the most accurate appraisal. Always hire your own appraiser.
While you're at it, it's not a bad idea to hire a real estate attorney as well. Refinancing isn't all that different from buying a home in the first place, and you want to be sure that you're protected. A real estate attorney can help you navigate the closing process and ensure that you understand the terms of the contract you'll be signing.
If you can get a good deal, refinancing can really take some of the financial pressure off. Avoiding these mistakes will help you ensure that your refinance helps your bottom line. For more information, contact professionals like Liberty Escrow Inc.