Many homeowners have seized the chance to refinance their mortgage since interest rates on mortgages have fallen to historic lows in recent years. However, there is still uncertainty about the refinancing procedure and its advantages. If you're on the fence about refinancing, dispelling the seven biggest myths may help you make up your mind.
1. Watching for rate reductions
It can be risky to wait for mortgage rates to decrease because there is no assurance that they will. When refinancing makes sense for you, your circumstances, and your objectives, it is a wise decision. You run the danger of missing out on a significant opportunity to reduce your interest payments every day that you wait for rates to decrease more.
2. It's too difficult.
Refinancing ought to be a benefit rather than a burden. Many of the required documents, such as title insurance, evidence of income (such as W-2 forms), and asset information (such as bank statements), are probably already in your possession or are easily accessible.
3. Anytime can be used for refinancing.
This may be the case in some instances, but not always. Your financial status or the home market can alter at any time.
4. Refinancing is not necessary.
Refinancing has various benefits. Your monthly payment can be reduced by a lower mortgage rate. A shorter-term mortgage will cost you less in interest throughout the course of the loan. Refinancing to a lower fixed-rate loan will give homeowners with adjustable-rate mortgages payment security for the remaining years. Funding for home repairs or other significant purchases is yet another reason why many homeowners decide to refinance.
5. My present lender is the only one I can refinance with
It is a good idea to give your present lender the chance to supply you with a refinancing since it is typically quicker and easier. But now is also a fantastic time to look for and compare mortgage providers, rates, and costs.
I won't be eligible for a refinance.
In reality, a lot of homeowners are eligible for refinancing. Even if you are having trouble making your payments or have little equity in your house, there may be programs available to help you refinance. However, there are criteria for qualifying, such as your existing loan-to-value ratio and whether Fannie Mae or Freddie Mac control your loan.
Remember that when refinancing, the length of time you've owned your house is less significant than the amount of equity you've amassed.
7. You must start over again
Refinancing creates a brand-new loan. To have the lowest monthly mortgage payment, many homeowners therefore start anew with a 30-year term. To shorten your payback duration, you can refinance into a loan with a shorter term, such as a 20, 15, or 10-year mortgage.
When mortgage rates are low, refinancing is frequently a very wise financial move. Some of the most popular reasons homeowners opt to refinance include saving money on monthly and life of loan interest payments and getting cash out for other expenses.
This article was contributed on Jul 30 2022