When speaking with potential customers, we hear a lot of incorrect assumptions about refinancing a mortgage. With so much in the media, it is understandable that some myths and misconceptions have developed over time.
Here are a few of the things we hear most often, with an explanation of the truth for each one.
Myth #1: The Costs Outweigh the Benefits
In most cases, the costs associated with refinancing a home mortgage can be saved in just a few years’ time. After that, the amount saved each month is truly savings and over the life of the loan can add up to a substantial amount of money.
Myth #2: You Must Have a Lot of Cash to Refinance
The costs associated with a home mortgage aren’t enormous, but can still be more than some people have saved and are ready to spend. The good thing is that you don’t have to have a lot of cash. In most instances the closing costs can be rolled into the loan. This makes the break-even point a little further down the road, but you can still benefit by saving money during the later part of your note.
Myth#3: You Have to Start Over Again, Delaying the Final Payoff
The beauty about a refinance is that it is actually an entirely new loan. Because of that fact, you don’t have to get the same terms as you had before. For example, Mission Mortgage recently had a client who originally took out a 30-year mortgage and had been paying on it for just over 6 years. At first the client was hesitant to refinance because she planned to stay in her home for the long term and didn’t want to start her 30 years over. After consulting with her, we found that we could move her to a 20-year term, shaving four years off of her payoff schedule and we saved her a little money each month, too.
Myth#4: You Must Own Your Home for Years to Refinance
The truth is the time you have owned your home has no bearing on your eligibility to refinance. The two key elements are rates and equity. The amount of time doesn’t matter as long as the rates have decreased enough that it saves you money to refinance and that you haven’t lost equity in the home. Every situation is unique and there are no blanket answers for all borrowers, but in most cases today’s rates can save you money. But hurry! Indications are that rates may begin to rise again soon.
Myth #5: You Must Refinance with the Same Bank
Again, because the refinance is actually a new loan, it doesn’t matter who refinances your home. The original loan will be paid off and the new loan will take effect. It also doesn’t matter if your loan was sold to another servicer. The new refinance will start a new loan for you. So, choose who you wish…but do it soon. The historically low rates we’ve seen recently won’t last forever.
Special Bonus When Refinancing
Did you know that when you refinance you get to ‘skip’ a monthly payment? That’s right. Your refinance pays off your loan and that acts as a payment to your original loan provider. The new provider won’t expect a payment until the next cycle date, giving you a month off from your regular payment. Now, technically, you aren’t skipping a payment…you still owe the full amount, but you do get a month without a mortgage payment when you refinance.
For more information about refinancing or to see how much you can save, email us today at firstname.lastname@example.org!