Debunking of 8 Popular Myths About Mortgage Refinancing
A mortgage refinancing process might be confusing, especially if you are refinancing for the first time. You do not know what to expect, and the more you read, the more confused you get. This is why we will debunk 8 popular myths about mortgage refinancing. After reading this text, you will be able to start your refinancing process with confidence.
Myth 1 - In order to apply for a refinance, you must be a financial expert.
There is no need to worry if you do not understand most of the financial terms - a support team that will help you throughout the refinancing process.
Myth 2 - You will need (a lot of) money to cover closing costs.
There are some options you can choose from if you do not want to pay for the closing costs up front. One of them is taking a 'lender credit'. You will pay a slightly higher rate, but your closing costs will be lowered. The other one is to add your closing costs to your mortgage balance.
Myth 3 - You will need tons of documents for an application.
We cannot tell you that this one is not true, but nowadays lenders can make this process a lot faster and easier by requesting only documents based on your situation, acquiring data from third-parties, and letting you sign and submit documents online.
Myth 4 - No one will give you lower rates than your current lender.
Most lenders will tell you this, but that is simply not true. Find out if your lender offers a 'Better Price Guarantee' - this usually means that if you find a more competitive price, your lender will lower its price to match it.
Myth 5 - You first need to reach the 'break-even point' of your current loan.
A 'break-even point' is the point which represents how soon you will recapture your original closing costs through lower monthly payments. You do not have to wait to reach this point in order to refinance your mortgage - you will still be able to save some money with a lower interest rate and longer repayment period.
Myth 6 - Your equity must be at least 20% if you want to refinance.
Even if your equity is less than 20%, you may still apply for a refinance. And even if your lender requires mortgage insurance, refinancing could still be a good idea - it will save you money as the time goes.
Myth 7 - The only reason to refinance your mortgage is to get a lower rate.
Getting a lower rate is certainly the main reason why you should refinance, but there are some other reasons, as well. You can benefit from refinancing with a longer repayment period, or you can take some cash out to invest in renovations or pay some other debts.
Myth 8 - After you refinance, you will not have as much money as you may think.
There is no need that you trust everything you hear. You can easily check how much you will save with an online refinance calculator. Your saving will depend on your current loan’s interest rate and the rates available today. You might be able to save up to a few thousand.