Florida homeowners from Hernando, Citrus, Pasco, Sumter, Marion, Sarasota and Manatee Counties are considering refinancing their mortgage. To many, however, this seems complicated due to several myths and misconceptions that surround refinancing loans.
Some of the most common misconceptions are:
1. Refinancing Doesn’t Save Much Money
One of the most common myths is that refinancing your loan or mortgage won’t result in any significant returns.
Nothing could be further from the truth; refinancing could save you thousands of dollars over many years to come.
2. Refinancing is Expensive
While refinancing isn’t free, it doesn’t cost an arm and a leg either.
You do have to pay closing costs and fees just like any other mortgage. However, if you find the right interest rate, the returns and benefits of loan and mortgage refinance could outweigh the costs.
3. Refinancing Could Hurt Your Equity
Your equity is affected if, and only if, you add to your principal. This applies to certain types of mortgage refinance such as cash-out refinance, where you pull cash out of your home, adding to the principal.
However, if you aim to get a lower rate or reduce your payment time, your equity will remain the same. This offers a rare opportunity for you to shorten your loan repayment, pay lower interest, while simultaneously increasing your home's equity.
4. It's Too Early for Your Second Refinance
You can always refinance your loan or mortgage, sometimes even six months after you previously refinanced.
With refinancing you never have to regret your financial mistakes, if a 15-year mortgage is more favorable than a 30-year mortgage, you could make the change with refinancing.
5. You Need 20% Equity
This myth has caused people to pass on the exceptional returns of loan refinancing. It has roots in the 2008 financial crisis, but no longer applies. Though mortgages with less than 20% equity usually require mortgage insurance, you may still refinance your loan and potentially reduce the mortgage insurance costs.
Also, loans such as FHA or VA may offer refinancing below that threshold. There are also conventional programs available to allow you to refinance with barely any equity.
6. People Only Refinance to Get Lower Interest Rates
Refinancing is more than just a strategy to get a lower interest rate. You can refinance your loan for several different reasons. Maybe you would like to reduce the length of your loan. Or you may also consider refinancing to and use the equity in your home to pay for college loans or buy a new car.
To learn more about how Liberty Savings Bank can help you start your refinancing journey, visit our website, or give us a call at one of our five Florida financial centers.
