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4 Common Mortgage Refinancing Problems to Avoid

You’ve found your dream home, now comes the hard part: paying for it. Your house is typically the greatest source of equity (meaning the most important investment) you’re likely to make. As any good mortgage lawyer in Toronto will tell you, that means the conditions of the loan you take out and adjust to pay for your home will have a massive impact on the future of your finances. As such, it’s absolutely critical that you avoid costly mortgage refinancing mistakes.

The vast majority of mortgage refinancing mistakes all share the same root cause: a lack of information and knowledge about the industry.

And that makes sense. Whether this is your first home loan or your fifth, understanding the complex intricacies of mortgages and the impact they can have on your financial health can be difficult.

That in mind, let’s touch on four of the most common mortgage refinancing mistakes, so you know exactly what to avoid.

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Not Shopping Around with Different Lenders

We all spend hours comparing prices for shoes, electronics, even cars online, trying to eek out the best deal. You should apply that same dedication and research to what is likely to be among the most important financial decisions you’ll ever make.

Statistics show that many homeowners never bother looking around for the best mortgage rates and terms. In other words, they are potentially leaving tens of thousands of dollars behind because they go with the first lender they meet.

Even a small change in the loan percentage can yield massive results, with thousands of dollars saved when you shave even half a point off your interest rate.

The same principle applies when searching out for the best refinancing option: don’t go with the first one that catches your eye.

Look around and test the market to find the best offer for you.

Adjustable-Rate Mortgages

Adjustable-rate mortgages can be risky for homeowners.

That’s because, as the name suggests, your mortgage rate isn’t fixed, but instead will fluctuate over the lifetime of the loan. If interest rates go up so will your payments. While there is a lock-in process whereby you can lock in your rate if interest rates start to rise you may also have to lock-in at a higher rate. These really depend on your risk threshold and whether you can afford an increase in interest rates. The advantage is  a lower rate now but if rates are rising you could face higher payments.

While there are some select instances where adjustable-rate mortgages can be beneficial, you should be fully aware of the terms for locking in before proceeding.

Changing Jobs before Your Refinance

While it’s always a good idea to accept new, higher-paying, lucrative job offers to improve your financial and/or personal situation, keep in mind that lenders don’t always see it that way.

Lenders use your employment situation as a way to assess your risk factor. If you have a history of job-hopping every few months, lenders are going to question whether you will be able to come up with adequate payments on time.

When you make changes to your employment, whether that means moving to a new company, going from salaried work to contract work, or becoming self-employed, it raises a lot of red flags about your income. In most cases, your lender is going to want a letter of employment and proof of income from your employer.

Even if changing jobs comes with many benefits for your and your family, it’s better to wait until after you’ve refinanced your mortgage before making any major job changes.

Longer Amortization

The lifetime of a mortgage is typically anywhere from about 20-30 years.

Mortgages with longer amortization periods are growing in popularity is because they allow an individual to purchase a larger house on a lower rate than if they had a shorter amortization period.

The problem lies in the fact that these longer mortgage lifecycles mean you’ll be paying interest for a much longer period. What’s more, you’ll likely end up paying a lot more in interest over time.

These longer mortgages work well if you plan on staying in the home for the entirety of the mortgage, but if you plan on reselling or refinancing, they can actually limit your options.

When refinancing, you’re likely to be better off finding a mortgage that has a shorter lifecycle, so you can begin gaining equity in the house at a faster rate, which then opens up more options for you moving forward.

Get a Top Lawyer to Refinance Your Mortgage in Toronto

When you’re looking to refinance your home, you’re always better off having an expert real estate lawyer in Toronto walk you through the process.

The legal team at Zinati Kay –Real Estate Lawyers has over 50 years experience helping buyers and sellers in the Greater Toronto Area with all their real estate needs. During that time, we have closed over 21,000 transactions.

Zinati Kay – Real Estate Lawyers is a full-service residential real estate law firm that provides fixed closing costs to our clients when they refinance, buy, sell, mortgage, or title transfer their property.

Get professional service and reliable real estate advice. If you want a professional real estate lawyer on your side as you buy, sell, refinance, or title transfer your property, contact us at (416) 321-8766 for more information about our services.