Safety Tips for Online Mortgage Refinancing

Mortgage refinance loans are a fast pacing trend in today’s consumer loan markets. Home prices almost always stay high. So many homeowners use the option of refinancing their mortgages or opt for a home equity loan. Online mortgage lenders have used quite a few innovative methods to make the application process easier and simpler. But as you know, shopping online can be quite a tricky business at times. Risks are always involved. To keep your transactions and personal information secured online, our market experts have provided some helpful suggestions and guidelines. 

Know whom are you dealing with

Before you click on the “apply now” button for a mortgage refinance loan, check and verify the respective lender’s credentials. As a worldwide common practice, websites usually post this information on an “About us” page. This page will mostly provide details such as company background, management hierarchy, certifications, and other mortgage sales experiences. If you are unable to verify any lender’s certifications, directly contact them or check with any of the mortgage related government agencies for verification. Genuine lenders will gladly provide all the relevant information for you to verify their credentials and certifications. They are aware of consumer’s concerns over online transactions.

The brand name

In online shopping, the branded firms get most of the business. People usually trust familiar and known names. Popular sites are known for providing excellent security features, which results in generating more traffic on their portals. The more recommended your online lender is, the better security they’ll have to offer. This does not mean that small time merchants are a taboo. They have secured connections and possibly lower rates too. So, do lookout for brand names, but also keep an eye on the small dealers.

The “S” of security

While applying online, look for two highly important and easy-to-identify security features on the web pages. A closed padlock or an icon of a key signifies that security options are enabled for the website. Also, on the address bar where you type the website name/URL, instead of “http” there will be “https”

For example: https://www.lenderxyz.com

These sites use an encryption service and have a link or a page dedicated to show the details about the connection.  But still, always be careful while filling out application forms; especially, the ones which ask for information such as your date of birth. These little pieces of personal information can be used by credit card scammers and other illegal activities. If you’re suspicious about a particular website, but they have been highly recommended, then contact them and ask for an executive to discuss their privacy policies.

Keep yourself updated

Keep checking for articles to educate yourself and to stay updated on the latest information about the online mortgage refinancing process. There a lot of websites which guide you through the process of home equity loans, mortgage loans and mortgage refinancing. Professional lenders are prompt with helpful advices and up-to-date information. They even conduct seminars and provide active online assistance to answer your queries.

Initially, taking precautionary measures might feel to be a little time consuming but, as the saying goes, better be safe than sorry.

So, keep these suggestions in mind while applying and working with online lenders for mortgage refinancing, and have a safe and satisfactory web experience.

 

Common Refinancing Myths

Refinancing is increasingly getting difficult and this trend is expected to prevail for a while before rates climb down and homeowners return to the market. Refinancing qualifications have become rather challenging. Conventional credit profiles are being scrutinized more. People with little or no home equity are at a loss on how to put their refinance plans into motion.

Here, we discuss some basics of refinancing. More importantly, we clarify some common refinance myths:

Myth: Refinance Eventually Leads to Losing Equity

Truth: This is a common misconception. Refinance doesn’t eat into your equity. In fact, it helps you save more over a longer period. This is true unless you opt for cash-out refinance where the loaned principal amount is raised. Secondly, some folks don’t understand the concept of building equity. Refinancing requires some strategy if you are serious about increasing your equity. More equity doesn’t mean getting a gift check from your lender or paying progressively lesser on your original loan.

Mortgage payments are made up of two parts. One part goes to your principal and the other towards the interest. If you find a refinancing option with no prepayment penalty, additional payments to decrease the principal helps. It allows you to create more equity. The refinance allows you to pay off the home loan in lesser time than the original loan period with negligible changes to your monthly payment pattern—these are significant savings!

Myth: Refinancing Before Reaching Breakeven Doesn’t Make Sense

Truth: This refinancing myth is the result of incorrect interpretations of breakeven period. Sometimes, rates drop to an irresistible low, luring people into refinancing aggressively. Some people start questioning the wisdom of refinancing when the breakeven of the previous loan hasn’t been fully realized.

People don’t look at the bigger picture. If the interest rate can be lowered to such an extent that you can absorb the new breakeven period and still get more equity, you should go for it! To avoid such confusions, follow the simple rule of keeping your refinancing decision one dimensional. If you can lower your rate without the need to repay more, you stand to gain. Please note that the best rate for you might not be the lowest rate in the nation. It is simply the best available option among the many mortgage quotes you receive.

Myth: Refinance Always Leads to Higher Closing Costs

Truth: Yes, refinancing helps you get some equity in times of crisis. Equally true is the fact that refinancing brings along some additional costs that aren’t always visible. Refinance calculations work out better in the customer’s favor when the credit amount is big. A slightly longer, bigger refinance helps to neutralize the high closing costs.

Before jumping on to conclusions work out the true cost of your refinancing proposal. Every refinanced mortgage comes with a GFE—Good Faith Estimate where the total closing cost is mentioned. This figure can be slightly confusing. Usually, it includes many components for which a borrower would be paying anyway. This includes partial or prepaid month interests, escrow property taxes, and escrow homeowner insurance. Besides these, other components such as documentation fees, application fee, credit report fees, and title insurance make up the true cost of refinancing.

Myth: Repeated Refinancing Approvals are Simply Impossible!

Truth: Refinancing isn't refused just because a borrower had refinanced in the recent past. There are no mortgaging or federal laws which limit lenders from lending to people who repeatedly refinance. Yes, the success rate for such refinancing applications might be lower, but the market understands that whenever lending rates are lower, refinancing will be in demand.

 

Some lenders prefer profiles where the customer has waited for a certain period before seeking another refinance. Some borrowers prepay on their existing loans to get a low rate refinance. Though there is nothing wrong with this strategy, it could lead to some losses. We recommend keeping a check on the prepayment penalties that have huge regional fluctuations. Prime mortgages are usually without substantial prepayment penalties.