Top 10 refinancing pitfalls
1. Automatically refinancing with your current lender without shopping around
2. Assuming lower rates will automatically save you money without considering overall cost versus savings
3. Procrastinating over applying for a home loan while waiting for interest rates to drop. Don't gamble on better future rates.
4. Failing to get your new rate locked in writing
5. Not doing your sums. Decreasing your interest rate by at least 0.75% to 1% will save you about $100 a month on a $150,000 mortgage
6. Switching loans or lenders without clarifying whether the total costs (including establishment fees, legal fees, stamp duty fees, ongoing fees) are outweighed by the savings in interest
7. Not having a lender or broker evaluate your credit rating and regularly revise your financial position
8. Not knowing the true cost of refinancing. Make sure your lender provides you with written statements on application fees, deferred establishment fees, or break costs on fixed loans.
9. Falling prey to the lure of honeymoon rates, which ultimately revert back to their original or higher rates at the end of the introductory period
10. Taking out money to pay off credit cards with no intention of changing spending behavior, racking up further debts while drawing out more home equity. Don't turn what could be a short-term debt into a long-term debt
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan