Don’t Do Mortgage Refinance Without The Facts: Five Myths That Get Homeowners Into Financial Troubles...

With some historically low interest rates, it does seem like everybody you talk to is trying to refinance their loan.

If you have yet to start the process or have started it, you need to check out the five mortgage refinance myths so you keep out of financial ruin.

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Five Myths You Need To Be Aware Of In Terms Of Your Home Mortgage and Refinancing

1 – Refinancing Is Just As Simple As The Initial Mortgage

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Okay, everybody’s circumstances are different so refinancing is on a case by case basis. Since the home mortgage industry got burned, their lending standards have gotten tighter in terms of guidelines to follow. If you didn’t have a lot of documents to show in the beginning, you might be surprised to see what you’ll be asked to show today. It may make it harder for some consumers to refinance but, in the end, that’s better for the industry and the economy. If you’ve got bad credit or little to no equity in your home, you may have a harder time getting refinanced.

2 – Refinancing Produces A Better Deal Than The Original Mortgage

For the most part, this is true. After all, why would you refinance into a bad deal? However, that’s not always the case. If you take out a refinance loan, you have closing costs associated with it. If you don’t have plans on being in the home for a significant period of time, then those closing costs won’t give you savings for the long haul. However, if you plan on being in your home for over five years and then decide to sell, you should consider the market and whether or not your home will sell. If you can’t, you might want to refinance for something more worth it.

3 – Refinancing Will Reduce Your Monthly Payments

Why should you refinance if not to get a lower monthly payment? But that’s not how it’s always going to be. In fact, some folks refinance to change their loan terms and type. They may decide to choose a short term loan that gives them a higher monthly payment. In the end, it’s less finance costs and more savings.

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4 – You Can Always Refinance If You Have A Loan

This statement is so false, it’s not even funny. You have to qualify for a refinance, and under some circumstances, you won’t be able to. You’ll need to learn what the equity is in your home. If you choose to have a no-interest loan or use the equity in your home to borrow against, you won’t have the right tools for a refinance. You should always have at least 20 percent equity in your home if you’re looking to refinance. If the value of the home has declined in the last several years, you could end up having a really hard time refinancing. In fact, you could owe more on your home than it’s worth.

5 – If You’ve Got An ARM, You Should Refinance The Mortgage To A Fixed Rate

It sounds like great advice but not always true for some folks. If you don’t plan on being in your house for a long period of time, then you don’t want to get into a fixed rate mortgage. You might even want to look into a low rate ARM with a fixed rate for the time you decide you’ll be in your home. This strategy is a real gamble and you’ll need to calculate the closing costs to your savings.

Yes, refinancing your home mortgage can be a great move for your finances. However, you should always know what’s in store and get a refinancing mortgage rate that’s great for you and your wallet.