Refinancing your mortgage can be a great option and save you money, but it can also cause issues, depending on who you refinance with and the type of loan you choose.
If you choose to refinance your home, follow these do’s and don’ts to avoid scams and make the best decision for your family. If you’re still unsure about the best way to refinance your mortgage, reach out to the team at T&I Credit Union, who can help you choose the best option for your situation.
The Do’s
Avoid Refinancing Scams
You may receive offers with unbelievably low-interest rates or suggesting that you sell them your home with the option to repurchase it. If you’re unsure of the legitimacy, look up the financial institution on NMLS Consumer Access.
Compare and Contrast
Before choosing to refinance, you must know precisely what your current mortgage is. Make a budget including your mortgage payments and current mortgage rates, and consider how long is left on the loan term. When comparing your existing mortgage to your mortgage refinance option, don’t just look to see which one has higher interest rates.
You’ll want to compare monthly payments, the loan terms, and what type of loans you’re considering. If you only have five years left on your current mortgage, it may not make sense to sign on for another 15 or 30 years. However, if the interest rates are significantly lower, you might want to consider it. Don’t forget to include closing costs and any fees in your calculations when comparing overall expenses.
Research Types of Refinancing
Not all mortgage financing loans are the same. With a cash-out refinance, you’ll have more money left to pay off, but you’ll also get an influx of cash you can use now. A rate-and-term refinance leaves the amount unchanged but lowers your interest rate based on your repayment history and credit score.
The Don’ts
Take a Loan for More Than Market Value
Before refinancing, you’ll want to get a current estimate for the value of your house. If you take a home loan for more than its value, you will likely face a much higher interest rate.
Get an Unsecured Loan
If you have multiple lines of credit and are unable to pay them all, you might be considering using your home equity to pay off your debts and improve your credit report.
Lenders of unsecured debt, like credit cards, cannot go after your property if you fall behind in your payments. However, if you refinance your home (a secured loan), your lenders can force a foreclosure.
Contact Your Credit Union
If you want to refinance your home, contact the team at T&I Credit Union to learn more about our options. We offer home equity loans and refinance loans with terms ranging from 10 to 30 years.
