Don't escrow taxes and insurance. Unless you're undisciplined, avoid putting monies in escrow to cover your property taxes and homeowner's insurance. There's usually a fee for this privilege that runs under 1 percent of the loan amount, in states where it's allowed. "Paying the fee will allow you to time your tax and insurance payments to your benefit," says Bank South's Steve Austin. For instance, you may be able to prepay taxes that are due next year and use those payments to reduce your current tax bill. Moreover, you get to hang onto your money longer. That may be an advantage when interest-bearing accounts start paying more.
Calculate the financial benefit of refinancing in one, two, or three years. Does the benefit compare with your plans for staying in your home?
Unless you are getting a lower interest rate, refinancing your home may cost you more money in the long run and may require you to pay higher monthly payments.
Be Patient. Processing all of the paperwork that's required for a new loan takes time. Be patient while your loan moves through the system. Protect your credit score by paying your bills and making your mortgage payments on time and not taking on any more new debt than you absolutely have to.
Know your credit score before you begin looking for a loan. If you can, try to remove any blemishes from your credit report before applying for a refinance.
