If you are one out of the 10.8 million American homeowners with an underwater mortgage, you know how financially challenging it can be to avoid foreclosure and recoup your home’s value. While refinancing is a popular option to get back on track with mortgage payments, it also has many pitfalls as well. By knowing common refinancing mistakes, you can avoid them and continue eliminating your mortgage debt. Many refinancing mistakes are common and can be avoided if you know to look for them.
How to Refinance Your Mortgage Debt Effectively
Knowing common refinancing mistakes also gives you the wisdom to make positive financial decisions. While record low rates make it a good time for refinancing mortgage debt, it creates a double-edged sword. Avoid these mistakes to pay back your mortgage debt without unneeded hardship.
Failing to shop lenders. The most common mistakes that homeowners make isn’t fully examining their options. By shopping a wide variety of lenders, you can find someone who has the best interest rates and terms for your situation. When refinancing, you want to shop around for the best choice – this in itself can save you thousands of dollars. However, be sure to also consider the cost of fees, as these can be costly and add up.
Over valuing your home. It’s important to remember that your home isn’t the same price it was when you bought it. Nationally, home prices are approximately 30 percent lower. Expect a higher refinancing offer if you don’t have enough equity.
Poor renovation timing. Whether you want to renovate for personal reasons or to boost the value of your home, do it before or after the appraiser comes. Since renovations mean your house will be a temporary mess, this can lower the appraisal value than it should have been if the appraiser comes during the renovation. However, waiting until the renovations are done are a great way to enhance value.