If you’re considering mortgage refinancing there are a number of pitfalls you’ll want to avoid so you’re not overpaying for the new home loan. Two common mortgage mistakes include being surprised by a prepayment penalty or falling for zero cost refinance offers. Here are several tips to help you avoid losing money to these two mortgage pitfalls.
Beware Mortgage Prepayment Penalty
If you’re thinking about mortgage refinancing it’s important to check with your lender to see if you’ve got a prepayment penalty on your existing home loan. Many homeowners that used zero cost mortgage refinance offers or went with a Hybrid ARM are often shocked to find they have to pay as much as six-month’s worth of interest as a penalty for refinancing. One condition of your business that you should spell out to prospective lenders is that you will not accept any loan offer that includes a prepayment penalty. This isn’t always possible if you’re opting for no cost mortgage refinancing; however, accepting a “zero” cost refinance isn’t always in your best interest.
Zero Cost Refinancing a Scam?
What about these so-called zero cost mortgage refinance offers? If as a homeowner you haven’t discovered there are no free lunches when it comes to your finances, that day is rapidly approaching. The fact is that there is no such thing as no-cost mortgage loans as you’re always accepting a higher refinance rates in exchange for covering your origination fee and closing costs. Closing costs average $5,000 for most homeowners; over the lifetime of your mortgage you’ll pay this amount three times over by accepting zero cost mortgage refinancing. If you think you’ll dump the home loan for another, better offer down the road, you can be sure that our old friend the prepayment penalty will be paying you a visit.
You can learn more about getting today’s best refinance rate without paying “sucker” fees by checking out my free Underground Mortgage Videos.