Mistakes to Avoid When Refinancing Your Mortgage

Refinancing your mortgage can offer numerous financial benefits, from lowering your monthly payments to securing a better interest rate. However, homeowners often make costly mistakes during the refinancing process, which can reduce or even negate these benefits. At First Ohio Home Finance, we want to help you make informed decisions that save you money and meet your long-term goals. Here are some common refinancing mistakes—and how you can avoid them.

Focusing Only on Interest Rates

Homeowners sometimes zero in on securing the lowest possible interest rate without considering other factors like loan terms, closing costs, or potential savings over time.

While a lower interest rate is important, make sure to evaluate the full picture. Compare loan options, factoring in fees, loan duration, and monthly payments. For example, switching to a 15-year mortgage might come with a slightly higher monthly payment but could save you thousands in interest over the life of the loan.

Not Accounting for Closing Costs

Refinancing isn’t free—there are closing costs involved, which can range from 2% to 6% of your loan amount. Many borrowers overlook these costs, thinking only of the lower interest rate.

Carefully review the Loan Estimate and Closing Disclosure provided by your lender. Ask if a “no-closing-cost” refinance might make sense for you, where the lender covers the upfront fees but adjusts your interest rate slightly. You can also use First Ohio’s mortgage calculators to see how long it will take to recoup the closing costs through monthly savings.

Extending Your Loan Term Too Long

Some homeowners refinance into a new 30-year loan even if they’ve already paid off several years on their current mortgage. This could mean paying more in total interest over time.

If your goal is to reduce interest payments, consider refinancing into a shorter-term loan, like a 15- or 20-year mortgage. Alternatively, you can look into loans that align with the remaining years on your current mortgage—this way, you won’t restart the clock.

Not Checking Your Credit Score First

If your credit score has dropped since you took out your original mortgage, you may not qualify for the best rates. Some homeowners assume refinancing is worthwhile without evaluating whether their credit profile has improved.

Check your credit reports in advance to ensure your score is in good shape. Pay down debt where possible, avoid new credit inquiries, and dispute any inaccuracies on your report. First Ohio Home Finance can help you assess your credit and suggest strategies to boost your score before refinancing.

Skipping the Rate Lock

Interest rates fluctuate frequently. Some homeowners assume the rate they are quoted will stay the same throughout the application process, only to find it has increased by the time they close.

Ask your lender about locking in your interest rate when you apply. A rate lock guarantees your quoted rate for a set period, protecting you from market volatility. Some lenders also offer rate-lock extensions if the closing process takes longer than expected.

Waiting Too Long to Refinance

Timing is everything in refinancing. Waiting too long to lock in a favorable rate can cause homeowners to miss out on savings if rates increase.

Monitor interest rate trends and work closely with a trusted lender like First Ohio Home Finance. Our mortgage bankers can help you decide when it’s the right time to refinance based on your financial goals and market conditions.

Refinancing Too Frequently

While refinancing can be beneficial, doing it too often might rack up unnecessary fees and reset your loan term repeatedly, reducing the financial benefits.

Make sure each refinance offers clear savings or aligns with your goals. Consider whether the savings justify the costs, and calculate how long it will take to break even on the closing costs before refinancing again.

Work with a Trusted Partner

Refinancing your mortgage is a powerful financial tool, but it’s important to avoid these common mistakes. With careful planning and guidance from experienced professionals, you can make the most of your refinance and achieve your financial goals.

At First Ohio Home Finance, our loan experts are here to guide you every step of the way, helping you avoid pitfalls and find the best loan terms for your situation. Contact us today to explore your refinancing options and take the first step toward financial freedom.