Refinancing Traps to Avoid

Refinancing is a great idea if you’re looking to pay less monthly or in the long run however, there are a few traps when it comes to refinancing that we recommend keeping an eye out for.

Automatic Payments

If you have automatic payments set up for your mortgage, remember to cancel it well in advance of your refinanced loan. Some automatic payments may take two or more weeks to be cancelled which means you could end up paying for the same month twice.

Missed or Late Payments

Even if you’ve applied for a new loan, you must continue payments on your old loan until your refinance is approved and active. Be sure your last payment is made and goes toward your payoff balance. Missing payments could negatively affect your credit score.

Tax Escrow

An escrow account is typically held by your bank and used to pay property taxes and insurance. With an original mortgage, you usually need to put two months of pro-rated insurance and taxes in the account.  With a refinance, you may need more based on the fact that your original escrow account may be held until the current loan is paid off.

Insufficient Funds

If something such as a low appraisal affects the amount your loan is, this could cause you to have less money than needed to cover your refinanced loan and closing costs. Many loans are set up to cover all closing and escrow funds, so if you end up with a lower amount then you may need to adjust your cash to close.

We want you to be aware of these potential pitfalls before they have a chance to occur. We will work with you and on your behalf to prevent and avoid them. Contact us to start your refinance today.