Mortgage Refinancing - How to Avoid Payment Shock

The best advice for homeowners refinancing their mortgages online is to read before you click. Payment shock comes in many forms and can lead to a mortgage payment you simply cannot afford. Here are several tips to help keep you out of financial hot water when mortgage refinancing.

The Internet is flooded with mortgage information promising to get you the best deal. The problem with refinancing your mortgage online is that most of this information is sales motivated. The mortgage that provides your loan originator the highest commission is not going to be right for your situation. What can you do to protect yourself when refinancing your mortgage? The answer is simpler than you think: Read.

Once you start reading the licenses and disclosure statements found on the mortgage sites you visit, you'll be amazed at the number of people lining their pockets at your expense. One popular "Lending" site that advertises on television receives a fee out of your pocket of as much as $1,300 simply because you filled out a form on their website. Most of the mortgage sites you visit online have nothing to do with mortgage loans and simply generate leads for mortgage lenders.

What's a mortgage lead? Your name, address, telephone number, and financial details are worth as much as $200 to $1,300 depending on the company selling the lead. The fact that the information is sold isn't the problem. The problem arises when the lender you choose passes that $1,300 fee to you on your Good Faith Estimate. When you find out that you've already agreed to pay the fee, it's too late.

Another form of payment shock comes from homeowners not fully understand their Adjustable Rate Mortgages. These loans typically come with teaser interest rates that are much lower than the contract rate. When the teaser expires and the lender adjusts the payment to the contract rate, this could result in a significantly higher payment amount. You can learn more about refinancing your mortgage while avoiding payment shock with a free mortgage tutorial.