8 myths about refinancing your mortgage
If you’re a first-time refinancer, you might be unsure about what to expect in the process. At Better Mortgage, our top priority is to provide you with support -- let’s start with dispelling some common refinance myths so you can approach your refinance with clarity and confidence.
Myth #1: You won’t save that much money by refinancing.
Refinancing could help you save a significant amount in interest, depending on your current loan’s interest rate and the rates available today. For instance, reducing your rate by just 1/8th of a percent could save you tens of thousands over the life of your loan. See how much you can save by checking today’s rates and using our refinance calculator.
Myth #2: You need 20% equity to refinance.
This is certainly not true. While loans with less than 20% equity may require mortgage insurance, you are still 100% eligible to apply for a refinance. Even with the addition of mortgage insurance, refinancing could still be a good move for you, particularly if it saves you money in the long run.
Myth #3: You haven’t reached the “break-even point” of your current loan.
You may have heard that mortgages come with a “break-even point,” the point in time when you have recouped your original closing costs through the savings of a lower rate. Even if you have not reached the break-even point for your current mortgage, refinancing to achieve a lower rate could help you reach an overall break-even point (and greater savings) even faster.
Myth #4: Your current lender can offer you the best rates.
Your current lender will likely tell you that they can get you the lowest rate to refinance into. At Better Mortgage, we stand by our pricing and encourage you to shop around with other lenders -- since launch, we’ve saved people over a quarter million dollars.
Myth #5: Refi’s are only about getting a lower rate.
There are many reasons to pursue a refinance other than getting a lower rate. Maybe you have built up equity in your home and want to take some cash out to do renovations or consolidate some other high-interest debts. Or maybe you want to get a shorter loan term to pay off your mortgage sooner to save on interest. There are many ways you can benefit from refinancing beyond the rate and Better Mortgage can help you with them all.
Myth #6: Applications require a lot of documents.
While it’s true that mortgage applications require a good amount of documents, what we need is pretty standard fare across most lenders. At Better Mortgage, we make the process faster and easier by personalizing document requests based on your situation, securely pulling in data from third-parties like your bank online, and allowing you to sign and submit documents digitally. Read this post to get a sense of what documents you’ll need to refinance.
Myth #7: You need cash to cover closing costs.
Refinancing includes closing costs similar to the ones you paid when you got your original mortgage (Better doesn’t charge any lender fees, so those won’t be included in our closing costs). If you don’t want to pay for closing costs up front, you have a couple of options. The first is to take “lender credits,” which lower your closing costs in exchange for a slightly higher rate. Another option is to “roll-in” your closing costs by adding them to your mortgage balance. Both choices can drastically reduce your closing costs and make a “no-cost” refinance possible.
Myth #8: You’re supposed to be an expert.
This may be the biggest misconception of all. Just because you’ve already purchased your home doesn’t mean you should remember everything about the mortgage process. Start your refinance in less than 3 minutes at Better Mortgage.