It’s easy to think that you can ALWAYS get the better deal, but if you take out too many second mortgages in too short a time or just refinance your home in general you could end up hurting your credit. Borrowing shows you’re not liquid, even if you repay quickly. The last thing you want to look like is a “bad borrower” – so only refinance when you absolutely have to. Here we’re going to talk about how it can ruin your credit and what you can do to get the right second mortgage off the bat the first time.
Hard Pulls Ding Your Credit
Each time a lender pulls your credit report, known as a “hard pull”, your credit gets dinged. So if you apply to a lender every month for the next 12 months trying to find the “right” deal, you could easily end up with a huge point loss. You have to time these things a certain way and you always want to make sure that the lender you’re applying for is really going to give you a good deal. A difference of half a percent is never going to be worth the cost to your credit to pursue.
Apply to Many in a Short Period to Avoid Dings
If you apply to 20 lenders in a 2 week period, you’ll only be dinged for the first one. After that first hard pull you’ll have 14 days of ding-free time so it’s always great to start applying to everyone at the same time. Like mentioned before, you don’t want to apply for a first or second mortgage (or any other financing for that matter) unless it looks like a good deal. Will you really be able to get a better deal by going down 2%? 1%?
Saving 2% Isn’t Worth Thousands in Closing Costs
Nope, it’s just not. Think about it, you might save $1,000 over the next 5 years of your mortgage, but if you have to pay $5,000 to close the mortgage what was the point in that? When you refinance you’re going to always want to get a better deal than you’re getting right now. You don’t ever, ever, ever want to pay more. Look at the savings on the whole and from top to bottom to get the best deal.
Use Mortgage Calculators to Know More
A mortgage calculator and a mortgage broker can help you really figure out where you’re at. If you’re not sure how much you’re going to really save from one mortgage to another, use a calculator. Not sure if you’re getting the best rate? Talk to a broker. Just not sure in general? Talk to a financial advisor. Don’t talk to a bank for mortgage advice if you’re borrowing – it’s their mission in live to get you to do business with them whether it’s in your best or not.