Sunday, May 29, 2011

Five blunders to avoid when you refi

From Bankrate.com’s Michele Lerner, “5 refi blunders to avoid”

“When interest rates are low, plenty of homeowners rush to refinance before evaluating the true consequences of their actions. A mortgage refinance can benefit some homeowners, particularly if they intend to stay in their home for the long term or if they can significantly reduce their interest rate. Sometimes, though, a mortgage refinance can be the wrong move.”

1. Not comparing the real rate.

Compare the true cost of the new loan with the APR of your current loan. If you are saving less than one-half point, don’t waste your time or money. Remember that Fannie Mae and Freddie Mac have added fees to loans where there’s little equity in the property.

“Borrowers who have little or no equity may qualify for a refinance under the government's Home Affordable Refinance Program, or HARP, available to those with a current mortgage owned or guaranteed by Fannie Mae or Freddie Mac.”

2. Choosing the wrong loan

What’s the purpose of the refinance? Afraid about losing your job, then lower your overall payment. If you want to be debt-free by a certain year, pick a loan that meets that objective.

Remember, closing costs can increase your payback.

3. Not shopping around

“While many borrowers compare loan offers from more than one lender, they can also shop for title services and save hundreds or sometimes thousands of dollars on their loan.”

Check at lease three lenders. Start with the servicer that has your loan now.

4. Refinancing when you shouldn't

If you don’t plan on staying in your home for several years, refinancing may be a waste of money. Know your break even point where the savings outweigh the costs of refinancing.

5. Not keeping up with borrower responsibilities

Keep up your credit score throughout the refi process. A lender can pull your credit report right before closing. So avoid adding new debt.

Read the full article.

For your next title order, contact
Stephen M. Flatow
Stephen's Title Agency LLC
165 Passaic Avenue, Suite 101
Fairfield, New Jersey 07004
973-227-4724 * 973-5561628 Fax
Stephen AT Stephenstitle.com

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