Refinancing Basics |
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Would you like to consolidate your debt into your home loan and save $$? Take advantage of a refinancing/consolidation quote from one of our national phone based brokers?
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There has never been a better time to refinance your home loan especially now as rates have increased and lenders are offering more attractive deals in a bid to win new customers. But whilst it is true that refinancing has the potential to help you reduce the costs associated with borrowing money, it is not necessarily the right strategy in every situation.
Refinancing your current loan may make sense for one or more of these reasons:
- If you want a lower interest rate and lower repayments.
- If you want a fixed repayment rather than one that can increase as interest rates rise.
- To consolidate your debts.
- If you want to use some of your home equity to pay for home improvements or other needs.
The better you understand your motivations, the easier it is to work with a lender or mortgage broker to discuss your refinance options.
Lower Your Interest Rate
The most common reason for refinancing is to lower the rate and repayment. A lower interest rate will result in a lower monthly payment as long as you don't significantly increase the principal balance of your mortgage loan. When considering refinancing to obtain a lower rate, it is important to know how long it takes to recover the cost of the refinance transaction.
Change Loan Products
Refinancing to switch from one loan product to another is quite a common occurrence. A small percentage difference in interest rates can make a huge difference over time. While a variable rate usually offers a lower introductory rate than a fixed rate, if future rises occur it may make sense to opt for the predictability and security of a fixed rate,
Consolidate Your Debts
If you're weighed down with credit card repayments or other loans you're not alone. One way to cut back on hefty credit card debt is to refinance your mortgage and consolidate your debts. A mortgage refinance or a home equity loan offers lower interest rates than credit cards, and will generate significant savings.
Use Your Homes Equity
Equity is the difference between what a property is worth and the amount still owed. By paying off both Principal and Interest as part of your repayments and with the real estate market rising significantly over the last decade you have probably built up some equity. By utilising this you can borrow additional funds, to pay for home improvements, a car or educational expenses.
In Summary
- The decision to refinance should only be made if the long term savings outweigh the initial expenses. Check with your current lender what it will cost to pay out your loan early.
- Don't select a new mortgage based only on its annual percentage rate, look at the features and options that best suit your situation.
- To get the best possible refinancing deal, you'll need to shop around, crunch some numbers, and ask lots of questions.
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