It’s easy to wrap your head around the concept of mortgage refinancing. It only takes a 100-word blog to explain its ins and outs, its benefits, and the best times it’s useful. Although the basics are fairly easy to digest, it’s safe to say that no mortgage is downright straightforward. Every type of home loan involves technical terms, features, and limitations only an expert can truly make sense of. Even someone who had successfully refinanced a mortgage in the past may still not fully comprehend how it exactly works. Misconceptions never die; the more this financial product multiplies into different forms to serve unique needs, the harder it is to tell one apart.
For starters, get these misguided assumptions out of your way:
You Qualify for a Mortgage Once, You Can Qualify Again
If you’re planning to apply for a Colorado or Utah refinance, industry professional Altius Mortgage Group explains that it means you already have a mortgage. You have previously qualified for a home loan before, so there’s no way you’d be denied this time around, right?
False. Lenders would check your eligibility based on your current credentials, not your qualifications several years ago. From your creditworthiness to your debt ratio, even your job history and list of assets, any mortgage provider would leave no stone to measure your capacity to repay a refinance now going forward.
It Doesn’t Require Money from You
Generally, you don’t cash on hand in a refinance before it involves no down payment. But you need to pay out of your pocket to cover closing costs (if any). Also, if your LTV isn’t low enough, you might have to take the cash-in refinance route and pay extra to add more equity on your property.
Without adequate ownership of your house, denial is a huge possibility.
Refinancing Guarantees Lower Monthly Costs
Most people refinance their mortgages to get today’s record-low rates. But just because that’s your intention it doesn’t mean it’s the right conclusion.
Your interest rate is only one of the many components that determine the real cost of your mortgage. You should likewise consider the length of your term and other fees the lender would require you to pay to accurate calculate your loan’s overall financial implication to your life.
True intelligence isn’t about not asking questions, but rather questioning the things you know. You must do your homework, and exercise your due diligence every step of the way.