Homeowners are often eager to refinance their mortgage and get cash back or a better interest rate. Many times, in the rush to save or get money, people make mistakes and overlook some things which can have a big effect on the expected benefits of refinancing a mortgage. Here are six home loan refinancing pitfalls homeowners should avoid:

1)Closing Costs and Fees which are Too Expensive
Many homeowners do not realize that these costs can often be thousands of dollars when everything is done. However, these costs vary dramatically among lenders and banks, and the only way to find out is to ask for a written estimate. With the estimates in hand, you can easily see which ones are too expensive, or question the lenders or banks who give you extremely low cost quotes.

2)Not Getting Interest Rates Locked In
Mortgage lenders and banks are often quick to quote you an interest rate. However, they will rarely offer you a written quote. You need to actually request this as it will lock in the quoted rate for a set amount of time. If you find a mortgage rate from a lender you like, ask them for a formal written confirmation of that rate. Also, make sure you know exactly how long that offer is good for. Make sure this is all in writing with the lenders signature.

3)Not Comparison Shopping
Especially these days, there are a lot of different banks and mortgage lenders who offer a wide variety of mortgage refinancing options. Planning ahead and giving yourself time to compare different refinance offers will really be worth it in the end. Also, be sure to let the lenders know you are actively hunting for the best deal. This will pressure them to offer you a good competitive refinancing package.

4)Getting Mortgage Refinancing too Often
While refinancing a mortgage can be a great move for many homeowners, there are costs and fees involved. It will always take some time to recover from these costs, and truly start to benefit from a refinance. Homeowners who get mortgage refinancing too often run the risk of never regaining the money they are spending on closing costs. Always be sure to do the math and figure out when you will break even from a refinance.

5)Not Considering Prepayment and other Mortgage Fees
Many home loans have a penalty within them that states if the loan is paid off to early, the penalty is enacted. This penalty always needs to be paid when refinancing a mortgage. Contact your lender if you do not have a copy of your mortgage and review it for these penalties. Make sure you account for the cost of them if indeed you have to pay them.

6)Too Much Cash Back from a Refinance
If you have a decent credit rating, many lenders and banks will offer you options that are for more money than you need. However, always keep in mind that this money will need to be paid back. Avoid the urge to get more money than you need when getting a cash back refinance. You should try to borrow as little as possible.

Homeowners make these mistakes all the time. Be sure you avoid these common mistakes, and get a beneficial mortgage refinancing for yourself.

-M Petrone

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