There are many refinancing myths that scare people away even though refinancing your home mortgage could save you hundreds of dollars each month. That’s why it’s so important to know what is a myth and what is a fact when it comes to refinancing.
Plus interest rates are currently near record lows, making refinancing an extremely popular and wise decision for many American homeowners. However, so many people are hesitant to get started because of something they’ve heard.
If you’re holding back on making the decision to refinance because of something you’ve heard, it could be one of the many myths going around. In this blog, we will debunk the top refinancing myths that some people believe are true.
Top Refinancing Myths
Myth #1: Interest Rates Are Too High Right Now
When mortgage interest rates begin to rise, many people think they missed their chance to refinance and get low rates.
However, mortgage rates are still historically low right now. So even though they may have risen in the past year, it’s still a good time to refinance. Even if the rate on your refinance loan can only drop one percent, you will still be able to save more money each month.
Plus there are many other reasons to refinance other than saving on your monthly payment. You can also shorten the term of your loan, consolidate debt, payoff a loan that’s due, and save on interest costs.
Myth #2: If You’ve Been Denied Before, Don’t Try Again
Many people believe that after they get turned down for a refinance, it would be a waste of time to try to refinance again. However, you can apply as many times as you’d like.
Also you can use the reason you were rejected as a guide to help you not be turned down the next time you apply. For example, if the reason you were turned down was because of a low credit score, then you can work on paying off all credit card debt, making bill payments on time, and watching what you spend your money on. Then once your score is at a reasonable level, apply again.
Myth #3: You Won’t Be Able to Afford It
Most of the time your lender will let you roll all of your fees into the amount of your new loan. So you won’t have to pay for the refinance upfront. However, if you can afford the price upfront then you can pay all of your closing fees right away, which would reduce the amount of your loan because the refinance cost is not being rolled into your loan.
Myth #4: You Need More Equity in Your Home
Originally, mortgage lenders made it mandatory that homeowners had 20% equity in their home before they could refinance. This could pose a problem for those that lost value in their home after they purchased it.
However, that rule is no longer the requirement. HARP (Home Affordable Refinance Program) was created by the federal government to allow homeowners the chance to refinance even if they don’t have any equity or have negative equity in their home.
Myth #5: Refinancing is a Difficult Task
Refinancing can seem like a daunting task because you have to shop around for the best deals, read plenty of documents (including the fine print), gather all and send in the necessary paperwork, and pay fees to the lender.
Did I scare you off yet? The thing is, it’s actually much easier than you may think to refinance and complete all of the necessary tasks once you’re working with a trusted professional. They have all the know-how and experience needed to make the process as easy as possible.
Are you ready to refinance your mortgage now that you know all of the refinancing myths?