Refinancing your mortgage is a good idea if the interest rates drop by at least two percent. It saves homeowners money, helps them build equity, and allows them to become debt-free faster. If you are refinancing for the first time, you might have encountered myths surrounding refinancing. To approach this process with clarity and confidence, here are some misconceptions about it that you should stop believing in:
Things You Should Know About Mortgage Refinancing
- It Won’t Save You Much Money. Many homeowners are hesitant to refinance their mortgage because they think they wouldn’t be able to save much money. In reality, refinancing could save them a significant amount, particularly in interest. Even reducing the rate by just a fraction of a percent could save them tens of thousands over the life of the loan. Savings still depend on the homeowners’ current interest rate and the rates available today. It’s best to use a refinance calculator to check today’s rates and see how much you can save.
- Preparing the Paperwork Is Inconvenient. Another hurdle cited by many homeowners who have yet to refinance is refinancing requires too much paperwork. The hassle of having to prepare a pile of documents together hinders them from pushing through with refinancing. While it’s true that the process involved can be a nuisance, saving tens of thousands of dollars over the next few years is worth devoting several hours of your time. Additionally, you have the choice to work with a mortgage company that can make the process more efficient. For instance, they can let you sign and submit documents online, pull in data from third parties, and personalize document requests based on your financial situation.
- Closing Costs Add Up. Closing costs usually amount to 2-5 percent of the loan amount, which means they can run into thousands of dollars. However, if you consider the amount of money you can save over the time of your loan, you will recoup those closing fees. In fact, your refinance would pay for itself in several years if you are able to save thousands of dollars on refinancing yearly. If you don’t want to pay for closing fees upfront, you have the option to reach out to mortgage lenders with no or low closing costs in exchange for a slightly higher rate. Another option is to add the closing costs to the mortgage balance.
- Borrowers with a Less-than-Desirable Credit Score Cannot Refinance. While it’s true that the best mortgage deals go to borrowers with high credit scores, you can still refinance even if you have a less-than-desirable credit score. To boost your credit score and get the best possible rates, pay your bills on time, keep old credit accounts open, monitor your credit reports, and use your credit only at 30 percent or below.
Your Los Angeles Mortgage Refinancing Expert: Shannon Christenot
It’s normal for first-time refinance borrowers to get confused about what to expect and have difficulty going through the process of refinancing. Unfortunately, because of this, many end up making the wrong decisions due to misconceptions. To prevent making the same mistakes, remember these myths when refinancing.
If you’re looking for a mortgage broker in Los Angeles, get in touch with me. With my help, you can get an affordable, flexible mortgage. Contact me at (818) 601-2231 for a free mortgage rate quote or a free home refinance analysis!