For homeowners struggling with finances or worried about a foreclosure, refinancing is one of the most appealing options to ease their mortgage payments. Refinancing provides a new loan that’s complete with new interest rates, payments, and terms. It’s the perfect option for people financially stable enough to avoid bankruptcy, but still worried about their monthly mortgage payments. However, while refinancing is an excellent option to prevent foreclosure, common mistakes could make bankruptcy a more appealing option.
Top 4 Refinancing Mistakes When Avoiding Foreclosure
With interest rates low across the nation, refinancing can save homeowners an incredible amount of money on their remaining home loan balances. However, finding the best rates isn’t always as easy as it sounds and can potentially be more difficult to navigate than bankruptcy. Regardless, by avoiding these mistakes, you’re prepping yourself for refinancing success that will prevent an unwanted foreclosure. The top 5 mistakes include:
1. Not knowing the accurate value of your home. Keep in mind that home prices have lessened since the housing market bubble burst in 2008. Though some homes and areas in the country are experiencing a rebound, chances are that your home doesn’t command the same price it once did. Research the accurate value of your home before visiting a lender.
2. Not knowing your credit score. Your credit score determines everything from interest rates to loan terms. If your credit score is worse now than when you originally got the home, you could waste your time refinancing only to get worse terms than what you already had. Fortunately, there are steps you can take to improve your credit, which will help you avoid foreclosure and a bankruptcy.
3. Only thinking about interest rates. Interest rates in a refinancing aren’t everything. Other terms such as penalties and monthly payments are factors that need to be heavily considered. Furthermore, be sure to inquire whether the interest rates are locked or variable.
4. Forgetting about the cost of refinancing. Remember that there are fees associated with refinancing itself. In fact, some people would have actually saved more money by avoiding refinancing because of the cost of changing their lender.