However, this is simply not true. It's possible to refinance your mortgage in as little as 8 weeks — and it's easy to use an online tool like Better.com to get started. With Better.com, you can quickly compare quotes from multiple lenders to choose the best loan for your needs.
Myth 2: You have to be approved for a high loan amount to refinance
This is another misconception about refinancing. Refinancing does not require you to borrow a high amount; if your circumstances have changed since the time you signed the original loan agreement, you may only need to refinance for a lower amount than what you originally borrowed. Of course, refinancing can also be used to increase your loan amount to cover expensive home repairs or other urgent costs.
Myth 3: You’ll always save money by refinancing
Refinancing certainly has the potential to save you money, but it isn't guaranteed. That's why you'll want to crunch the numbers to make sure that refinancing your mortgage makes sense for your particular situation. Generally speaking, if you can get a lower interest rate or better terms on the new loan compared to what you're currently paying, then it may be worth considering.
Myth 4: You must have perfect credit to qualify for a loan
While it's true that your credit score is important when it comes to refinancing, you don't need perfect credit to qualify and benefit from it. Depending on the lender, you may qualify for more affordable loan terms even with a lower credit score. Taking steps to improve your credit score in the months before you apply for a loan could help you secure a better rate.
Myth 5: Refinancing will impact your taxes
This is not generally true. While certain types of loans may have tax implications, your taxes will not usually be affected by refinancing. A tax advisor or CPA should be able to confirm this for you.
Myth 6: Your credit will take a hit if you refinance
Your credit score could temporarily dip after you submit applications for a new loan, as lenders will perform credit checks in order to determine your eligibility. But once the loan is approved and you show a good payment history, your credit score should recover.
Myth 7: You must switch to a different lender when refinancing
You don't necessarily have to switch lenders when refinancing — many lenders offer refinancing options for current customers. As a result, you could score the same competitive rates and terms without having to jump through hoops to switch to a different company.
Myth 8: Closing costs are too expensive
Closing costs can be expensive, but they’re often worth the money if they help you secure a better loan. And fortunately, many lenders offer no-closing-cost options for refinancing, allowing you to save a significant amount of money.
Summary:
Refinancing a mortgage can be a great way to save money, but many homeowners are put off by the thought of it being too complicated. This is not necessarily true, as the process can be completed in as little as 8 weeks with the help of an online tool like Better.com. It's also important to note that you don't have to be approved for a high loan amount in order to refinance - the amount could be lower than the original loan depending on your circumstances. But before doing so, it's important to crunch the numbers to make sure that it's worth it for your particular situation, and that you may qualify for more affordable terms even with a lower credit score. Refinancing will not always save you money, but it could still be worthwhile due to lower interest rates or better terms on the new loan. It also won't impact your taxes, and your credit score should not take a hit as long as you show a good payment history. Finally, you don't have to switch lenders when refinancing - many existing lenders offer refinancing options for their customers, and some even offer no-closing-cost options.
This article was contributed on Oct 20, 2023
