Refinancing a house is not much different than having to change out the pitching roster in the middle of a game. Where things may go good the initial couple of innings, there might come a period in which there is a better choice for changing conditions upon the field. As the rates change, your needs may change with them, and there is a ton of information you will have to sift through to decide if making a change is the right thing for you.
Below are common refinancing myths which come up in conversations around social gatherings, the office, and at the dinner table and what you must understand before going through the process of debt replacement.
Myth: Home refinancing will decrease your costs.
Fact: As decreasing your interest rate reduces your month-to-month payments, you will wind up paying more interest within the long-term if you prolong the length of a mortgage. Thereby, if you are refinancing a house, keep the duration of the loan the exact same length or shorter.
Myth: You have to have 20 percent equity in order to refinance.
Fact: The majority of lenders like seeing at least 20 percent equity for a refinance. But, VA and FHA loans often will permit you to refinance if you are below this.
Myth: Your credit union or bank will provide the better interest rates.
Fact: Some credit and banks will extend specialized interest rates for long-term, existing, customers. This isn’t always the case, and like all other major purchases, you ought to prepare to shop around to locate the better interest rate from a broad array of lenders.
Myth: Refinancing requires cash and is expensive.
Fact: You’ll have to pay title insurance, closing costs, and fees, in addition to an appraisal, costs for an attorney and potentially pro-rated interest. Those may add up quickly. Most lenders, however, will permit you to roll those costs into the payments either by providing you a somewhat higher interest rate or adding closing costs to the overall amount of the loan.