Refinancing your home loan can offer great financial benefits, but there are several pitfalls to avoid to ensure it’s a wise decision.

Pitfalls:

• Overlooking Closing Costs: Refinancing involves closing costs, which can range from 2% to 5% of your loan. If you don’t plan to stay in the home long enough to recoup these costs, refinancing might not make sense.
• Resetting the Loan Term: While lower payments sound appealing, refinancing into a new 30-year mortgage resets the clock on your loan. This means you could end up paying more interest over time, even if your monthly payments are lower.
• Ignoring Your Credit Score: Your credit score significantly affects the interest rates available to you. Refinancing with a low score can result in a higher rate and negate the potential savings.
• Not Shopping Around: Lenders offer different terms and rates, so failing to compare multiple offers could mean missing out on the best deal.

To make refinancing worthwhile, carefully consider how long you plan to stay in your home, evaluate closing costs, and research different lenders to get the best rates.