Here are some common mistakes most people make in mortgage refinancing.
Not scrutinizing potential lenders:
Most people feel safe with the banks and / or mortgage lenders that they're currently dealing with. However, this is by no means a good practice. You must keep on shopping around to find the finest rates. This applies even when you feel your mortgage lender ROCKS!
And when you spot a better offer, you should compare it with your running deal. Shopping for better rates and deals is just like making big purchases. It's the best way for you to be sure that you're getting the best currently possible with your mortgage refinancing.
You should also try to find the perfect time to apply for a mortgage refinancing. Even when you're applying for it to your current lender, there's still a question of how much you qualify for the refinance.
Not knowing when to break even following a refinance:
When you've made up your mind to refinance, it can be almost guaranteed that you'll need to bear expanses on closing costs. Such costs might surpass virtually all your savings via the refinancing.
So, do some math on the fees involved in closing costs along with the rate of interest of your newly refinanced mortgage. Also see when and when you'll break even. However, you reach your break even when you're done with payments of closing costs (that were added in course of your refinancing).
Forgetting to request lenders for the Good Faith Estimate:
If you're eyeing a mortgage lender, the first thing you do is to request a Good Faith Estimate. This will reveal an estimate of details regarding closing costs, hidden fees (if any), and other fees related with your mortgage refinance.
When you request for such an estimate, you deserve the reply in three business days – as far as the industry norm is concerned. But an honest lender might very well provide you with one even when they're not asked for.
Disregarding the assessed value of your property:
Such value is figured out by the tax assessor in your local county. The loan amount has little to do with such value assessment. Rather, the value of the property has to be figured out with a unique method called 'sales comparison' approach. This is alternately known as 'cost approach.'
Getting yourself a low value appraisal:
When you know your house is not that valuable, you better not spend additional money to have a value assessment. A far better approach would be to get the value reviewed with an AVM model. To asses your home's value, it averages the values of other homes within your neighborhood.