Five Hidden Dangers to Watch Out for When You Refinance Home Mortgage Rates

If you went by the many commercials that assault all of us each day, getting new refinance rates on your home is no more difficult than going to the grocery store to buy a loaf of bread. While it is true that mortgage rates are probably lower than they have been in decades and lower than they will be for a long time in the future, that doesn’t mean that entering into a process to find new refinance home mortgage rates is going to be as simple as the marketing gurus on TV would like you to think.

Taking on the project of getting out of a high interest home loan and into mortgage refinance rates that are much lower can pay off big time. You can sometimes get a refinance mortgage rate that is 3-5% lower than what you are paying now. The result in terms of your monthly payment can be huge. But along with the great benefits of getting better refinance home mortgage rates, there are some hidden dangers that the commercials on TV will not tell you about. Here are the top five.

1. Online Mortgage Refinance Companies May Mark Up the Rate

It probably comes as no surprise that those offers that come on TV don’t tell you the whole story. There are some hidden surprises that will come up if you actually used a service you found from a blind ad through the internet or on TV to find good refinance home mortgage rates. It is a good rule of thumb that if they can advertise for your business, they have ways to make plenty of money off of the transaction once they get you on the hook for a new mortgage.

One way that a company that is trying to get control over your mortgage can make plenty of money is to adjust the mortgage rate as closing gets closer. They might advertise 5% mortgage refinance rates. But if they show up at the closing with a rate of 5.25% or 5.5%, that small adjustment means plenty of profits for the mortgage company. So make sure you lock in the advertised rate and that you have the option to get up and walk away if it changes.

2. Origination Fees Can Sneak Up on You

It is good to know up front before you even start looking into to refinance home mortgage rates that you will be paying closing costs and many of the same fees you paid when you closed your original mortgage. Before you commit to refinancing a mortgage with one particular lender, get what the fees will be defined well in advance.

In that you know exactly how much your new mortgage will be for, you should be able to define those fees with some precisions so there will be no surprises at closing. One of the most commonly used “scams” that are used to get more money out of you while your mortgage loan is being processed is the origination fee. Make sure that this isn’t just a fancy word for a false expense that doesn’t have anything to do with the loan.

3. Closing Costs Can Eat Up Your Savings

The entire idea of finding a good deal to refinance home mortgage rates is to get your costs down. But there is no getting around it, a new mortgage, even with your existing mortgage company means you will have to pay some closing costs. How much those closing costs will run can vary significantly and mortgage companies are not averse to hiding extra charges in those fees hoping you will just pay whatever it takes to get the loan.

It pays to shop around and nail down closing costs before you commit to let one company refinance home mortgage rates for you. By getting quotes for several lenders, you can make pre-defined closing costs a condition of them getting the loan. And when you have several mortgage offers in front of you with all closing costs defined, you are the one who is running the show on what you will pay at closing.

4. It is Possible to Get Turned Down

It is important to keep in mind that when you are starting the process to refinance home mortgage rates, it is still a new loan. It seems like it could be an assumed that since you own a home, which gives you solid credit, you should be able to refinance any time you want to. But you will still have your credit evaluated. If your credit score is too low and the lender fees the risk is too high, you could get turned down. This can be a tremendous disappointment if you were looking forward to that much lower mortgage rate.

5. Penalties That Can Trap You in That Loan Forever

Even though the motivation for finding a loan that will give you the ability to refinance home mortgage rates, it pays to invest in some legal help before you sign a contract that will be in force in your financial life for the next 30 years. One hidden danger that can live in that contract is a stiff penalty for early pay off of the loan. That means that if you win the lottery or just want to refinance again down the road that penalty is waiting for you

If you find that kind of penalty, you should at least have your lawyer revise the contract to take the fees out. It might be a good idea to find another lender. If they laid that kind of hidden trap for you because it implies that they might not do honest business down the road. And when you enter into such a large and long-term financial relationship such as a contract to refinance home mortgage rates, you need and deserve an honest lender.