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Four common refinancing mistakes to avoid

Learn more about four common mistakes homeowners make when refinancing - and how to avoid them.

By Terence Loose | Yahoo! Homes – Thu, Sep 13, 2012 6:18 PM EDT

 

Are you thinking of refinancing your home mortgage but afraid you'll screw it up? While there are a number of common mistakes people make, take solace in the fact that these slip-ups can be avoided.

First things first, you want to make sure that refinancing is right for you, says Fred Arnold, a loan professional and treasurer of the National Association of Mortgage Brokers (NAMB).

"It has to make financial sense. It has to save you money and work for your future financial goals," says Arnold. For example, you want to ensure that with the new loan's terms, you'll save money. Another thing to consider is how long you plan to stay in your home. According to Arnold, to cover the cost of refinancing, it'll need to be about two years or more.

[Click to compare mortgage rates from multiple lenders on Yahoo! Homes now.]

So if refinancing sounds like a good option for you, read on for four common mistakes and advice for avoiding them.

Mistake #1: Failing to Shop Lenders

America is the land of freedom. And freedom usually means choice.

So when it comes to a decision as big as refinancing your home mortgage, the last thing you want to do is give up that choice by going with the first loan you're offered. After all, you could be talking about hundreds of thousands of dollars.

That said, don't expect a huge amount of options when it comes to comparing interest rates.
"Rates right now are phenomenally low," says NAMB President Don Frommeyer. "But there's not a lot of difference between lenders. Maybe an eighth of a point. "But that eighth of a point (or .15 percent) could add up over time.

Below is one instance that shows why it's still important to shop. Our example, which we plugged into mortgagecalculator.com, assumes a person is borrowing $300,000.

To read the entire article from Terence Loose / Yahoo Homes:
http://homes.yahoo.com/news/four-refinancing-mistakes-to-avoid.html


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