Considering refinancing your home loan? When done properly, refinancing can shave significant margin off your interest rate, though you’ll have to avoid some pitfalls that could see you paying more than ever. Bypass these easy-to-make mistakes and you’ll be sure to lower your monthly repayments.

Sticking With Your Current Lender

Even though it may seem easier than shopping around, refinancing with your current lender is not always the best thing to do, even if you’ve been a great customer to them and your relationship is good. More often than not, it pays to compare different lenders, so make sure you’ve investigated all the options available.

Not Figuring Out Your Break-Even Point

Figuring out how long you’ll have to stay with your new loan before you start saving money is – at worst – Year 8 math, and yet many people don’t take the time to do it. The calculation is very simple: Add up the total exit fees + any additional penalties your old lender charges when you exit their loan, and divide that figure by your monthly savings. The resulting number is how many months you’ll have to remain with that loan before you start coming out ahead. For example:

If your exit costs equal $5000, and you save $200 a month, then it will take you 25 months to start saving money.

If you have another 10 years before you’ve paid off the loan, then that’s a no brainer.

Not Reading What You Sign

Instead of signing the loan documentation at your closing appointment, get a copy beforehand and read them over closely. Don’t try to go through your docs at the meeting – you’ll feel the pressure to sign from all corners and skip important details.

Being Late With Paperwork

The process of refinancing isn’t a quick one – it could take up to 1-4 months from start to finish. There isn’t a whole lot you can do to speed things up, bar getting relevant paperwork off to your mortgage broker/lender. If you are tardy in getting your paperwork organized, that limited-time-only home loan may be long gone.

Resources:

First Choice Loans is a mortgage broker that specializes in
home loans and business loans.