For any homeowner who is thinking about refinancing their home, the decision to do so is difficult; that is, it should be difficult. Unfortunately, many homeowners want to get the process over with as soon as possible and though there are valid reasons to expedite the process, rushing too much can lead to making mistakes. This can turn the new mortgage from being beneficial to harmful. Despite this, there are several reasons why homeowners should consider getting a new mortgage to replace their original one. Today’s conversation we will focus on reasons to refinance a home in 2014 and to be aware of mistakes to avoid so that acquiring a new mortgage will not get derailed.
When a person is deciding on whether or not to commit to something, the general rule of thumb is to go ahead and commit if there are more pros than cons as a result of said action. When looking to refinance a home in 2014, the question becomes why a mortgagee should consider going through the process of getting a new mortgage this year instead of waiting. To start off with, one of the popular reasons to refinance now has to do with lowering a homeowner’s interest rate. This year, interest rates have declined to what some say are record lows and no one knows how long until these rates begin to go up. Even if the difference between an original’s mortgage rate and the present rate is slightly lower, it is worth for a mortgagee to secure that rate of interest where it can not only lower their interest payments in the future but present an opportunity to switch to a new loan that has a shorter length to it.
What a Shorter Loan Term Can do
Another reason for refinancing now is switching from a long term/length loan to a shorter one. The longer the term of a loan is the more interest payments a homeowner must make. Switching the term of the mortgage from long to short will save a homeowner most likely thousands of dollars in paying off monthly interest payments as well as becoming mortgage-free that much faster. The final reason worth mentioning is if a homeowner is in need of extra income and the equity/value of their home has increased, then the equity can be utilized as the much needed extra income. This new-found income can now be used to pay off high credit card debt or for other financial issues that can now be resolved. While there are other reasons why homeowners should consider refinancing their home, it is important to know that there are some mistakes that can be costly if one is not careful in avoiding them.
Failure to Shop Around for the Best Quote can be Costly
Hopefully, homeowners who are considering whether or not to refinance their home can find enough reasons to go for it now instead of waiting until it is too late. Though the process can lead to a wasting of time and money if an applicant does not know what they’re doing, rushing for the first quote that is offered can be costly. One mistake to avoid is not shopping around for the best quote but jumping at the first one offered. While the process will be finished quickly, chances are that had the applicant looked at a variety of mortgage companies, one of them would have provided a competitive rate that was lower than the first offer. So, instead of finding a loan with a lower rate, the applicant will have to pay more each month because he/she missed out on securing a lower rate from another company.
Another mistake to avoid has to do with having a home’s value appraised. During the negotiating process, a lender would initially offer to have one of their appraisers to calculate the worth of an applicant’s home. While this may seem to save time and money if the applicant does not have their own, this can be a costly mistake on many levels. The issue is having someone that doesn’t work for you reporting the so-called “value” of your home. The appraiser works for the lender and therefore is a conflict of interest. Since no one cares more than you on what your home is worth, it would be better to hire your own appraiser. This may be an added expense but at least you will really know what the value of your home is.
The phrase “decisions…decisions…decisions” goes perfectly in trying to secure a new mortgage. While some may think it is better for interest rates to drop even lower than they are now, others feel that now is the time to refinance as the current low rates will soon be history. Of course, those looking to refinance a home in 2014 may feel that there needs to be valid reasons why now is the time to acquire a new mortgage. Some homeowners would agree that if they want to secure a lower rate of interest than their current mortgage has, 2014 rates are low enough that an applicant should not pass on this opportunity. Also, another opportunity to take advantage of is the ability to shorten the term of your new mortgage. Switching from your original mortgage that has a 30-year term to a new one with a 15-year term, you can save thousands of dollars on interest payments as well as paying off your mortgage quicker. Once a homeowner decides to refinance their home, it is important to avoid costly mistakes such as not shopping around for the lowest interest rate that is available. The bottom line is if a homeowner goes through the whole process of refinancing the right way, chances are that the homeowner will be successful in refinancing their home.