The Internet is an excellent resource for shopping for a home loan; however, there is a lot of really bad advice available online. Common mortgage mistakes, especially from bad refinancing advice can cost you thousands of dollars. Here’s an example of bad mortgage advice you’ll find online from JR Hevron of MortgageLoan.com
Many professionals suggest that you should not refinance if there is less than a 2% difference between the interest rate on your new loan and your old one. The savings are just not worth the time and effort, especially when you factor in the closing costs.
This particular nugget of bad mortgage refinancing advice is known as the two percent rule. Instead of relying on bad advice like this it makes sense to evaluate your refinancing options on a cost/savings basis. The fees you pay determine how good of a deal you’re getting on your mortgage refi because you’ll have to recoup your closing costs before you realize any savings from your new home loan.
You can easily determine how long it will take you to recoup your expenses from mortgage refinancing by adding up all of your closing costs and dividing by the difference in your mortgage payments. For example, if your new payment is $100 a month lower and you paid $3500 to refinance, it will take you ($3500/$100=35 months) just under three years before you break even. If you’re ok with the amount of time it takes to recoup your closing costs then mortgage refinancing makes sense in your situation.
You can learn more about avoiding common mortgage mistakes that result in overpaying thousands of dollars by checking out my free Underground Mortgage Refinancing Videos.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
