Consumers make many mistakes when refinancing their homes. A new survey of mortgage lenders has identified the five biggest mistakes made by borrowers who are refinancing to a lower rate.
Last Thursday, Freddie Mac reported that a 30-year fixed-rate averaged 4.15 percent — the lowest level on record.
As rates have retreated, refinances have been resurrected, with new refinance inquiries up 8 percent during the past 12 months based on the Mortgage Market Index report.
With the rush to refinances only expected to rise, consumers need to consider the mistakes being made their peers.
A list of the top five mistakes has been compiled by LendingTree, which surveyed its network of lenders.
At the top of the list is overestimating the value of their homes. Some borrowers don’t realize how much home values have fallen and can be disappointed when loan offers are less than expected.
Hesitation to lock their interest rates was next. Lenders say some borrowers miss out on the opportunity to lock in at currently low rates because they wait for rates to fall further.
The third-biggest mistake is only focusing on interest rates. Borrowers also need to factor in lender fees, loan terms and lender reputation.
After that was choosing a 30-year loan without considering the benefit of shorter-term loans. Consumers need to consider how much less interest will be paid over the life of the loan when they opt for a 10-, 15- or 20-year mortgage.
No. 5 on the list of biggest refinance mistakes is being unsure about what documents are required to refinance. The survey indicated that borrowers who haven’t recently refinanced sometimes fail to come in with the required documents — delaying the closing process.
