Mistakes Borrowers Make in Refinancing - Mortgage Professor

Mistakes in Refinancing

Measure the benefit of refinancing by comparing the reduction in monthly payment with the cost to refinance.

Shop your existing lender first, rather than last.

Refinance periodically as a way to raise cash.

Take a no-cost refinance when you expect to be in the house for a long time.

Measure the cost of a cash-out refinance with the APR.

Refinance into a biweekly at a higher interest rate for the purpose of reducing total interest payments.

Taking a cash-out refinance with the cash going to another lender who provides a lower-rate mortgage and assumes responsibility for the cash-out refinance.

Assume that a refinance is a good deal if it results in significant savings over your existing mortgage.

View refinance and prepayment as alternatives.

Refinance without taking advantage of the 3-day right of rescission to ask yourself if the deal will really leave you better off.

Respond to a solicitation for a 1.25% mortgage.

Rely on a mortgage broker or loan officer for advice on whether to select a second mortgage or a cash-out refinance.

Delay a profitable refinance because you have not yet recovered the cost of your past refinance.

Refinance to Reduce the Payment In Anticipation of Sale.