Summary: Wondering if it is ok to get your home refinanced? Dispel your myths and look at the positive side of refinancing. You might be able to save a lot in the process.
Often times when mortgage lenders contact you, you may have considered getting your home loan refinanced. In fact there is no harm in going with this decision if you can save a few thousand dollars or make your monthly payments more affordable. However, there are many myths that make people believe refinance is not for them. Here is an attempt to dispel all such myths so that you can think clearly and come up with the right decision.
Myth #1: It is a bad time to refinance when the Fed interest rates are rising
The best time to refinance would be when the rates are low. However, this doesn’t mean you have lost your window of opportunity if you see the Fed rates climbing up. Fed rates do not necessarily affect mortgage rates, at least not directly. Even if mortgage rates do follow the trend, this is not your deciding factor in determining a successful refinance. It is your break-even point. Divide your closing costs by the amount that you can save through the refinance to find out your break-even point. For instance, if $3,000 is your closing costs and you can save about $150 a month if you refinance, your breakeven point would be 20 months. So a refinance would make sense if you are going to stay in the house beyond these 20 months.
Myth #2: It is not a good idea to refinance if the closing costs are too high
Closing costs are not something you can avoid while going for a refinance. Nevertheless, your bank or the mortgage lender who got in touch with you through mortgage live transfer leads can roll your closing costs into your new loan, based on your loan-to-value ratio. With this option you will have no out-of-pocket refinance costs to worry about.
Myth #3: Refinance will extend the term of the mortgage
It doesn’t have to. You can get your loan restructured to any length that you are comfortable with. If you can get a low interest rate, you can even shorten your term and get rid of your debt sooner.
Myth #4: Refinancing is only for changing the rate or loan term
While these are some of the main reasons to refinance home loans, there are also others that are more popular. One such option is the cash-out refinance. Here you can tap into your home’s equity and use the funds to take care of a number of things such as:
- Home remodeling
- Education costs
- Wedding costs
- Vacation costs
- Medical expenses
- Vehicle purchases
- Debt consolidation
You can also refinance to add or remove a co-borrower, in case you marry someone or get a divorce from your spouse.
Myth #5: Refinancing is very time-consuming and involves a lot of work
It typically takes about a month for a refinance to come through. This includes home appraisal, insurance title verification, loan underwriter review, as well as the document follow-up. If you have submitted all the required documents to the mortgage lender who comes to you through mortgage live transfer leads, the process of refinance is going to be quick and easy.
Myth #6: My refinance application might get rejected just like the last time
It may not if things have changed since then. For instance, your credit score might have improved since the last time you applied for your refinance. Or you may have found a better paying job. This puts you in a better position to qualify for a refinance. Anyways, there is no harm in giving it another try.
Once you are done dispelling these myths, you will find more reasons to refinance your home. Discuss terms with the local lenders who contact you via purchase mortgage leads. Get your queries clarified and find out if a refinance can actually help you.
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