Pitfalls of Refinancing That You Need to Be Aware Of

refinancing your home, condo, coopIf you're a homeowner, then you may have noticed that you are being bombarded with offers to refinance your mortgage. It's no secret that mortgage rates are low right now. This means that refinancing may offer you an opportunity to save considerable money, especially over the long term.

However, there are several pitfalls of refinancing, and most of these are not obvious to the average consumer. This means that it may be wise to have an experienced real estate attorney advising you throughout the process.

Legal representation is not a requirement when you are refinancing, however, it does make good sense. This is because you are the only one who is looking out for your best interests in a refinancing transaction. The lender with whom you interact may be friendly and helpful. They are ready to answer your questions, and they may even try to find ways to score you an even more favorable deal.

When all is said and done, that friendly representative isn't really looking out for your best interests. They are trying to make a sale that will benefit their mortgage company and perhaps their own wallet. Additionally, that representative is a professional who has considerable experience in the industry. This makes them an expert, while most borrowers have only participated in one or two mortgage transactions.

This relative inexperience puts the consumer at a disadvantage, which means that they may be vulnerable to one or more of the pitfalls of refinancing. These may include agreeing to a pre-payment penalty, in which the borrower is subject to a sizable surcharge if they refinance or sell prior to a certain date.

Some less-than-reputable lenders will entice borrowers with interest rates that look great, but that get switched before the paperwork is signed. Additionally, excessive fees may make the refinance less sensible than it appears at first.

Some lenders also fudge the numbers on closing costs. Initial estimates are one thing, and they may be quite attractive. However, these costs can be calculated in numerous ways. The precise loan terms also may affect the amount of the closing costs. Legally, disclosure of the closing costs must be made within three days of the loan closing. An attorney can ensure that the lender is in compliance with this requirement.

If you would like to learn more about avoiding the pitfalls of refinancing, contact the Sabra Law Group at (646) 472-7971.


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