How to Ruin a Perfectly Good Refinance

With interest rates at historical lows, many people are refinancing their mortgages. Perhaps you’re considering it. If you refinanced your home before, you may think it is an easy process. And if you have a huge salary, no debt, high credit scores, and lots of equity, you might be right. But for the rest of us mortals, refinancing is not as easy as it used to be.

Remember the headlines about record mortgage defaults, upside down loans, and delinquent borrowers? Well so do banks, and thanks to a slew of new regulations, both those imposed by federal regulators and enacted internally by overly cautious lenders, the process of obtaining a new loan is now roughly equivalent to getting a root canal in many cases.

The Contra Costa Times has provided a list of “Five ways to mess up a mortgage refinance.” Here are the highlights.

Fool yourself - Deluding yourself about the value of your home is an excellent way to ruin a refi. Too many homeowners ignore falling home values in their neighborhood, convincing themselves their houses are worth at least what they paid for them.

Delay - Homeowners who delay locking a good mortgage rate risk making a refi uneconomical.

DIY disaster - Taking a sledgehammer to the interior of your home before the appraiser arrives is a good way to get turned down for a refi.

Disappearing act - Want to throw your home loan into limbo? Go on vacation and don’t tell the lender. Lack of communication will throw a pending mortgage into turmoil. Remain accessible.

Go for broke - If you want to do long-term damage to your personal finances, start all over again by refinancing for a full, 30-year term. That way, you spend thousands of dollars on interest that you otherwise could have saved.

Yes, it is a great time to refinance your mortgage. But be smart about it. Be realistic about the appraised value. For a quick summary of the online valuations for your home, you can go to the Online Home Value Estimate page. Also, be sure your credit score is good. And carefully consider exactly how much money you will be saving.

If you’re considering a refi but think you may need some help or if you want the name of a good mortgage broker, give me a call and I’ll be happy to connect you with one.