If you’re managing your mortgage, you’re undoubtedly considering when the lower rates will rise again. After all, the improving economic landscape might change things—but no one knows when they will change again. For these reasons, refinancing your mortgage can be a solution for you.
However, before you jump in with refinancing, you must consider some misconceptions about refinancing mortgages. These myths usually affect many homeowners’ decisions about their financial problems.
Read on to learn more about the misconceptions to refinance your mortgage successfully. This article will discuss the myths that typically keep homeowners from refinancing their mortgages.
Myths About Mortgage Refinancing
- You Must Have Perfect Credit to Qualify. Most homeowners think that it is crucial to have good credit before qualifying for a mortgage. While it’s true that a credit score around 800 can earn you an excellent interest rate, remember that numbers below the average, such as 670, do not exempt you from refinancing. Some lenders consider credit scores below 800, so fret not. However, if you desire to improve your score proactively, you can always check it ahead of time and do what you see fit.
- Pay Your Closing Costs with Cash. Another myth that homeowners think of is the notion that they must pay their closing costs in cash. Remember that there are external fees for every transaction, title fees, tax, and appraisal, to name a few, even if a lender has their discretion on refinancing costs. The majority of lenders can roll such fees into the new mortgage without requiring cash upfront. Keep in mind, though, to calculate the break-even point you can take advantage of for your savings.
- Have 20 Percent Equity before Refinancing. Since there’s generally a need to provide a 20 percent down payment when purchasing a home, many homeowners think 20 percent equity is also necessary to refinance. While the 20 percent down payment is seldom accurate, the 20 percent equity is a different case. An 80 percent loan-to-value ratio might be ideal in financing. However, homeowners can avail themselves of several lenders and products, particularly those who haven’t achieved such ratios yet. More so, while others can leverage private mortgage insurance, some FHA and VA programs can work with 100 percent refinancing.
- You Must Reach Your Break-Even Point on Your Current Mortgage First. Many homeowners believe that they should reach their break-even point on their current mortgage before refinancing a mortgage to earn more savings. While this perspective might be valid to some, the results will depend on the new interest rate.
Hence, it will be best to refinance before reaching the break-even point on one’s current mortgage to reach an overarching break-even sooner.
Refinance Your Mortgage With Shannon Christenot
Refinancing your mortgage is a solution that can help you manage your financial situation well. Now that you have learned the four common myths in refinancing a mortgage, you can get your home loan in Los Angeles by working with an experienced mortgage broker.
Shannon Christenot is an NMLS and BRE-licensed mortgage broker in Los Angeles. With two decades in this industry, we can help you get excellent rates, connect you with cost-saving programs, and help you conquer the LA housing market. Feel free to call me at (818) 601-2231 today to help you, and let’s discuss your refinancing needs.