10 Mistakes to be Avoided while Refinancing Your Home Part 1

refinance mistake
Many are there who are unhappy with their recent loans and like to refinance it to have more suitable loan or low interest rate. But before taking any decision they must be aware of the most common mistakes people while refinancing. A wrong step can lead you to sleepless night for rest of the life. Let’s have a look at the top 10 mistakes that people commit while refinancing.

1. Not checking the market for better option :-

Some people believe it is easy to deal with the current lender at the time of refinance. But the offer of the current lender may not be best in the market, so better to have a look at the options available at the market. Comparing the offers you can get the right choice. Some prefer stick with the present lender as you don’t have to re-qualify for getting the new loan. But it’s a misconception as whenever you apply for a refinance, the present lender will also verify your present financial situation and you have to qualify again. So it is better to shop around in the market.

2. Going with the assessed value of your property :-

Your loan amount doesn’t depend on the value of your property assessed by the tax assessor of your country. The loan amount depends on the appraised value that the real estate agent finds. Generally the appraised value determined through cost approach or the sales comparison approach.

3. Skipping the Break Even Analysis :-

To find the cost effectiveness of your refinance loan, try to check the total money that you are going to spend in getting the loan and how much you can save with lower monthly payment. You can calculate it by dividing the transaction cost by the monthly amount of money going to be saved by the new loan.
Just have an example: If your refinance cost is $1000 and monthly saving is $25. Then your Break Even point will be 1000/25 = 40 months. In this scenario you can opt for refinancing if you want to stay with the refinance loan for at least 40months.

For next part Check out 10 Mistakes to be Avoided...Part2

10 comments:

  1. Very well presented blog.
    Great post.
    You have mentioned very useful points that one must keep in mind while refinancing their home.
    Keep up the good job.

    ReplyDelete
  2. Hey. thanks for the tips. im not in that position at the moment but it's always good to know.

    Cheers,
    -M

    ReplyDelete
  3. businessvartha.blogspot.comMarch 12, 2009 at 12:21 AM

    Great post.
    You have mentioned very useful points

    ReplyDelete
  4. well presented blog. Really looking nice. thanks for commenting. Please folllow my blogue

    ReplyDelete
  5. Now can be a very good time to refinance if you are in the right situation.

    ReplyDelete
  6. It's very informative. Thanks for sharing.I also have a blog about investment, but not as cool as you. I think I may learn more from you,lol.

    ReplyDelete
  7. Thanks Sherry,

    For the encouraging comment. I also had checked your blog, It is also packed with useful information. :)

    ReplyDelete
  8. Wonderful information. I like your explanation and it is very usefull.
    Thanks

    ReplyDelete
  9. good information for people to financial

    ReplyDelete