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5 Common Refinancing Mistakes to Avoid When Interest Rates are Low
19 days ago
5 Common Refinancing Mistakes to Avoid When Interest Rates are Low

With mortgage interest rates at their lowest in years, you might be thinking it’s the perfect time to refinance your home loan. Lenders often advertise refinancing as a simple process that can save you money each month. While refinancing can indeed be a straightforward experience, there are some common mistakes that could end up costing you thousands of dollars over the life of your loan.

To ensure you make the most of your refinancing opportunity, here are 5 common mistakes to avoid.

1. Not Shopping Around

Not all home loans are created equal. Even if two loans offer the same interest rate, they may have different fees, terms, and conditions. It’s essential to compare your options before committing. Look at the overall costs, including any application fees, exit fees, and ongoing charges, to ensure you're getting the best deal.

2. Shopping for Too Long

While it’s important to explore your options, keep in mind that interest rates can change quickly. In a volatile market, you risk losing a great deal by taking too long to make a decision. A good rule of thumb is to request quotes from three different lenders at the same time, then choose the most favourable option from those quotes.

3. Adding Years to Your Repayment

Interest rates aren’t the only factor to consider when refinancing. If you’re already several years into a 30-year loan, taking out a new 30-year mortgage can reset the clock and cost you thousands in extra interest. Avoid refinancing to a longer loan term than what you have left on your current mortgage, unless you have a specific reason for doing so.

4. Not Considering Job Stability

The job market has been unpredictable in recent times, especially during the pandemic. Before refinancing, carefully consider your employment situation and how stable your income is. Refinancing can involve upfront costs, and if you’re switching to a shorter-term loan, such as from a 30-year to a 15-year mortgage, your monthly repayments may increase. Ensure you have the financial stability to manage these higher payments.

5. Assuming Your Credit is in Top Shape

Your credit score plays a key role in determining the interest rate and terms you’ll be offered when refinancing. Before applying, check your credit score and resolve any issues that could impact your approval or result in a higher interest rate. Surprises at closing could derail your refinancing plans or cost you more in the long run.

Conclusion

This is an excellent time to take advantage of low mortgage interest rates, but it's essential to approach refinancing with caution. By avoiding these common mistakes, you can ensure that refinancing works in your favour and helps you save money. Take your time to compare your options, consider your financial situation, and choose a loan that aligns with your long-term goals.

If you're considering refinancing, contact Agent Team Real Estate today for expert advice on how to make the best decision for your home loan.

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