Clear Talk About Mortgages

Most homeowners will refinance their mortgage many times, benefiting from their equity by consolidating debt, doing home improvements, or accomplishing other financial goals. Still, there are several mistakes that refinance consumers make frequently.

Here are just a few mistakes you will want to avoid the next time you refinance your mortgage:

1. Maxing Out Equity

While you will be tempted to access as much cash as your lender will allow, you must be careful not to borrow too much. By tapping into all your equity (or exceeding it with some aggressive loans), you will leave yourself in a precarious position if you face financial hard times. Make sure you have a clear goal in mind for refinancing and only borrow what you need to accomplish it.

2. Not Getting a Copy of Your Rate Lock Acknowledgement

When dealing with a lender, you will want to "lock in" the rate that best fits your scenario. Do not, however, take your lenderÕs word for it that the rate is not going to change. Be sure to ask them for a copy of the rate lock agreement. That way they cannot try to raise the rate on you before closing.

3. Do Not Sign for or Pay a Prepayment Penalty

When obtaining your next refinance, do not saddle yourself with a prepayment penalty (PPP). Guarantee yourself that you can pay off your mortgage should you sell your home or need to refinance again. Also, do not refinance your mortgage if it currently has a PPP unless you are going to save a considerable amount of money over the long term by doing so.

These are just a few mistakes to avoid with your next refinance loan. Above all, be sure to take your time choosing a new mortgage loan and lender.