by Emma Adams
The Internet abounds with refinancing horror stories, some about problems with mortgage refinancing. This is not to scare you but to show that mistakes are costly, and it is possible to make the most of your mortgage agreement.
You may have valuable assets, an excellent payment history, a perfect credit score, and still be unable to qualify for refinancing. These include administrative errors, bank delays, and other acts of God. You might be attracted by the low mortgage rates offered on the market, especially in the wake of a recession. For example, the Canadian branch of JP Morgan Chase is offering an annual rate of 4.125 percent on a 30-year refinancing loan. At a rate so low, it is definitely cheaper to refinance than pay off your current home loan. Most people are attracted by such offers. What?s the catch? To get approved, you should have a significant amount of equity in your house. If you don?t meet the requirements (have less than the required equity), you will not qualify, but you can get a loan with a higher interest rate. When you draw the line, it emerges that you are not saving very much on your current loan by refinancing, and you are going to all the trouble for nothing. Or you are paying a lot to go to all the trouble because the new loan you are offered has a really high interest rate.
Before you decide to go with refinancing, ask yourself the following questions. Do you expect interest rates to go up? Or have they fallen already? Is your credit score decent or have you managed to increase it as to be offered a low interest rate? Whatever your decision is, do not forget that your house is your most valuable asset.
Sufficient equity ownership is the main problem in most cases of refinancing. There are other possible issues as well - bank delays, clerical errors, mistakes related to appraisal of the property (claiming it is bigger or smaller than it is. Overlooking the details of your agreement can lead to problems as well. Sometimes you find that the loan is costing you more than you expected. It may happen that you cannot make payments and fall behind. You may be forced to refinance again and again. Your credit score will be affected as a result, and the next offer you get will not even match the last one.
Eventually you may be driven into bankruptcy, hounded by collectors if you have other credit payments you are behind on, or reach a debt settlement with one or more of your creditors. When you start having these problems, they will tend to form a downward spiral where you are getting in deeper and deeper. Problems just follow one after the other from bad to worse.
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