Many homeowners use refinancing as a way to access the equity in their home and get the cash they need to consolidate debt or to finance a larger expenditure. And while refinancing can be an extremely effective tool for doing these things, there are some myths sounding it that homeowners should be aware of. Here are 5 refinancing myths that you shouldn’t believe. 

Myth 1: Refinancing won’t cost anything

In many circumstances, homeowners stand to realize substantial savings when they refinance their mortgage. In fact, this is how they are usually sold the idea of refinancing. But refinancing is not without its costs. Because you are breaking your first mortgage when you refinance, there will be a penalty which can be as much as 2 to 5% of the principal on your current mortgage. 

A good mortgage broker however, will ensure that any savings to be realized through refinancing are greater than the costs of doing so before they recommend refinancing as an option. 

Myth 2: The most important consideration is the interest rate

While the interest rate is an important thing to consider, there are other factors that come into play when deciding to refinance your mortgage. The term of the loan for example is a very important factor. If you are part way through a 30-year term and renew with another 30 year mortgage, you essentially reset the debt clock and are adding years of payments to your mortgage. 

Homeowners looking to refinance should consider looking at a shorter term or making extra payments on their new mortgage. 

Myth 3: Refinancing your mortgage will affect your ability to sell your home

Unlike home equity loans and HELOC, when you refinance your mortgage, it does not put an additional lien on your home, so it won’t affect your ability to sell your home. All a refinance does is swapping your current mortgage for a new one.

Myth 4: Refinancing won’t require a credit check

Some homeowners are surprised to learn that a credit check is required when they refinance their home. After all, they have been paying their current mortgage for years without issue. To the lender however, this is a new loan and they want to ensure that the lender has the ability to pay. 

Before you decide to refinance your home therefore, it is important that you make sure that your credit is in good order. 

Myth 5: You may only refinance your mortgage once

Did you know there is no limit on how many times you can refinance your mortgage? That being said, it may or may not make financial sense to refinance your mortgage multiple times. You have to make sure that the savings you realize from the refinance are always greater than the costs. Generally speaking, the closer you are to your mortgage renewal date, the less it will cost you to refinance your mortgage and the more sense refinancing is likely to make. You will also want to consider any recent changes or forecasts for mortgage interest rates.

This is why working with an experienced mortgage broker who can run these calculations for you is extremely important. 

Contact Sure Loan for You today

Are you wondering whether refinancing is the right decision for you? Contact Sure Loan today to speak to a mortgage team.