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Many times, what we know about securing a mortgage comes from what our trusted family and friends know. But this information can be outdated - or even completely wrong! There are seven common misconceptions consumers have regarding refinancing mortgages:
Myth #1: Everyone should refinance the minute rates drop by a 2% margin. If you plan on being in your home for a long time, then rates don't even have to drop by 2% in order for you to save money.
Myth #2: If you refinance, you'll save more money! Not necessarily. Refinancing is a great way to lower your monthly payments, but you're probably going to be stretching out your loan for a longer period of time ' thus owing more in the long run.
Myth #3: Instead of refinancing, just double up on your current loan payments. While this is sometimes a smart move, it's not always accurate. Sometimes, your best bet is to do both - refinance if it's going to save you money, and send in extra on your loan whenever possible.
Myth #4: Consolidating your debts with a refinance loan will make it easy on you ' one low monthly payment and a possible tax deduction! For many consumers, consolidating debt means they're freeing up credit to charge even more. Make sure you're ready to overhaul your lifestyle before you double, or even triple your debt load.
Myth #5: Refinancing with some extra spending money is a good way to splurge. A family vacation to Hawaii may be very tempting, but don't put your home on the line if you're not sure you can afford the extra borrowed cash.
Myth #6: Folding in closing costs is great for a refinanced loan. Many lenders offer this as a way to get you to stop shopping around. Keep in mind that folding in closing costs means you'll be paying interest on these fees for the length of your loan!
Myth #7: A 15-year refinanced loan is always better if you can afford it. It's great if you can afford it - but how do you know what your future holds? It's smarter to take out a 30-year mortgage and then pay it off in 15 years.
About The Author: Brian Torrance is a loan specialist with Apex Personal Loans Store. Their area of speciality is personal loans, debt consolidation, and home equity loans.
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