The Dos and Don’ts of Refinancing: The Proper Way of Refinancing

The Dos and Don’ts of Refinancing: The Proper Way of Refinancing

 

Are you planning to refinance to switch to more competitive rates or reduce your debts? Here are some dos and don’ts so you won’t fall on some pitfalls when it comes to refinancing.

DOS

1. Speak to an expert before refinancing

Sure, money talks can be uncomfortable. Being honest to another person about your current financial situation doesn’t sound fun either. But trust us, speaking to an expert broker before refinancing can actually save you from lots of hassle in the future. They’re able to connect you with a lender that can offer more competitive rates, helping you save time and paperwork. Just be transparent to them about your goals and situation so they can look for the best solution for you.

2. Consider shorter term loans

One of the benefits of refinancing is you can choose a shorter term loan. For instance, you may choose a 10-year plan if you still have 15 years left on your 20-year mortgage. So if you have a chance and if your current situation allows, refinance to shorter term loans. This will help you save on interests plus, you can achieve a debt-free status earlier.

3. Make sure that your finances are in good shape

You need to be in good status for your refinancing to be approved, so make sure that everything is in good shape. As much as possible, pay off your current debts to rebuild a good credit history and enhance your credit score. Make sure that you also double-check your credit report for any mistakes that may get in the way of having your loan approved.

DON’TS

1. Don’t jump ship just because of “special offers”

There are people who fall into the traps of special offers and honeymoon rates only to end up with less competitive interest rates. Watch out for offers that are too good to be true. Take note that there are lenders who offer very low interest rates for the first few years, but revert back to higher rates in the future. If special offers are your only reason to refinance, think again and seek expert advice first.

2. Don’t refinance a home for more than its market value

It’s tempting to say yes when a lender offers you a loan amount that is more than the value of your property. But be careful and don’t make a hasty decision. You might wind up paying more due to high interest rates, which could put you in danger of going into foreclosure early.

3. Don’t send out several mortgage applications to different lenders

While it’s nice to do your research and compare several mortgage refinancing options, it is not advisable to send multiple applications to various lenders. Why? Each lender will require a copy of your credit report which may be an additional hassle for you. Also, multiple applications tend to hit your file and negatively impact your borrowing score as lenders will know whether your loan was declined.

Circling back to our first point, it is best to talk to an expert broker first and they should be able to connect you with the best solutions for you. With this, you won’t have to make the mistake of sending out multiple applications.

Fastgrow Finance is here to help

Don’t hesitate to contact us. Our experienced brokers will work with you to understand your refinancing goals and find a lender that suits your needs.

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