7 mistakes people make when refinancing a home or car
1. Do not consider refi
Refinancing your mortgage or car loan could save you thousands of dollars, but many people might not think about this money-saving measure, especially when it comes to cars. While refinancing a mortgage loan is complicated enough, refinancing your car loan is usually a quick and painless process. Edmunds.com rating. If your credit score has improved or interest rates have dropped since you bought your vehicle, contact your lender about refinancing, especially if you have a longer term loan.
2. Not being prepared
You’ve gone through all of the auto loan or mortgage application hoops at least once, so when you refinance you might be tempted to go through some details. Speeding up the process or taking shortcuts can be a costly and time-consuming financial mistake.
Before you go to the bank, make sure you’re up to date on your credit score, current interest rates, and your home’s value (if you’re refinancing a mortgage). You will have a better idea of what to expect when you speak with the loan officer and whether or not you are getting a good deal. This is also a good time to re-evaluate your monthly budget to decide if you can afford higher monthly payments if you plan to switch to a shorter term loan. For mortgage refinancing, you will also need pay stubs, W2s, tax returns, information about your debt and investments, and other financial documents. You can reduce the headaches of refinancing by having all of these documents organized in advance.
3. Increase Debt Before Applying
The higher your credit score, the better the rate you will get on your new mortgage or car loan. If you’re considering a refi, wait until you make big credit purchases and don’t open a bunch of new credit accounts. Either move can hurt your credit score, which means you won’t get such a favorable rate when you refinance.
“Don’t buy a new car, make other major purchases, or complete multiple credit applications before refinancing, because all of these actions can hurt your credit profile,” Michael Smith, Senior Vice President – director of business development for California Mortgage Bank and Trust in San Diego, told HSH.com.