If you are refinancing your mortgage there are a number of mistakes that will cause you to overpay for your new mortgage loan. Doing your homework and researching mortgage lenders will help you avoid making these mistakes. Here are three things to watch for when refinancing your home loan.
I. Watch Out for Balloon Payments
If you accept a mortgage with a balloon payment you will be required to pay the amount due on a date specified in your loan contract. If you are unable to make this payment you will have to refinance the loan or sell your property to avoid foreclosure. Mortgages with balloon payments are typically used by real estate investors as a source of short term financing; however, predatory mortgage lenders use them as part of a ploy to take your home. Unless you know exactly what you are getting yourself into avoid any home loan with a balloon payment.
II. Watch Out for Excessive Fees & Rates
If you are a homeowner with poor credit you can expect to pay more for your new mortgage. There are lenders that will take advantage of your credit and charge you excessive fees and rates. Some Predatory lenders try and sell bad credit loans to homeowners with good credit in order to charge higher rates. The only way to know what fair rates and fees are for a homeowner in your financial situation is comparison shop from a variety of mortgage lenders. When you comparison shop the right way it is easy to spot mortgage lenders that are trying to take advantage of you. You can learn more about comparison shopping for the best mortgage by registering for a free mortgage guidebook.
III. Be Careful With Adjustable Rate Mortgages
Adjustable rate mortgages have more risk than traditional fixed rate mortgages. Many homeowners are enticed by the introductory rates and low payment amounts; these homeowners often don’t realize their payments will go up significantly at the end of the introductory period. In addition to this payment increase, the mortgage lender will adjust your interest rate periodically and change your monthly payment depending on prevailing interest rates.
You can learn more about your home loan options by registering for a free mortgage guidebook.
By: Louie Latour
Posts Tagged ‘Refinancing Your Mortgage’
Refinance Home Loan: 3 Costly Home Loan Mistakes
February 4th, 2010Refinance Loans
January 2nd, 2010
The most common reason that people refinance is to save money, but there are many other reasons why you should refinance.
1. What about refinancing to lower payment on a current loan:
You may be able to refinance your current loan at a much lower interest rate thus reducing your loan payments monthly. With interest rates at their lowest in years, you might be able to find some lower rates – sometimes far much better than what you are currently paying for your mortgage. Refinancing your mortgage or loan when rates are down could save you lots of money over the life of your mortgage loan.
2. Refinancing and Consolidating Debts:
Some choose to consolidate debts and refinance to replace loans of high-interest with a low-rate loan. Most loans being consolidated and or refinanced may include higher student loans, home loans and those “bad” credit cards. So, by refinancing and consolidating you will clear all your current loans and replace them with one low monthly payment with a better interest rate. Example of this would be on a 3,000 loan some homeowners can save in excess of $60 a month which is a big saving. A debt consolidation loan is one of the best solutions for anyone who has several monthly payments. Refinance loans will allows you to repay your existing loans from the money of a new loan .
3. Refinancing to Reduce the life of the Loan:
Reducing the term or life of your loan can help you save money over the loan duration. Example might be refinancing from a 9-year loan to a 5-year loan will result in higher monthly payment, however your total of the payments made on the loan can be reduced significantly. Also keep in mind that by doing this you will be able to build up your home equity much faster. A refinance loan often will save you thousands in interest charges over the term of the loan.
4. Refinancing your Variable to Fixed Rates:
Some people will often refinance in order to change their loan from a variable rate to a fixed rate . This will help you to achieve stability and the security of a fixed loan. Your Fixed loans are most popular when interest rates are low, and variable rates tend to be more popular when rates on the higher side. Rates that are low will allow you to refinance to lock in the low rates. When rates are high, you might prefer the short term discounted variable rates on a loan to obtain a lower payment. One of the biggest benefits to refinancing is having the ability to lock a low interest rate for the life of your loan.
When considering to refinance you should carefully look at all of your options so that the savings you make by refinancing out weigh the costs and penalties. Most homeowners can refinance, but the point is to find a loan that will better the existing loan or mortgage.
By: Troy Francis