Refinancing a loan means you replace an existing debt obligation with another, or you pay off the original loan or the last refinanced loan by making a new loan. The previous home loan taken for your home, for example, will be paid off by the second or the new loan you take. Among the reasons to refinance a home loan is to lower the interest rate on the current loan, and there is a good chance that you can get a new loan that has a lower interest rate – at least 1% lower – if you are a borrower with the coveted perfect credit history.
Refinancing your home loan could result in considerable monthly savings, if you can manage to find a mortgage that has a lower rate of interest, that is. If you have a fixed rate mortgage and the rates are going down, refinancing would be a wise move that could result in a huge monthly saving. Before you start to seek out a reliable mortgage broker, however, there are a few things you have to consider.
Seek Professional Advice
There are many different types of mortgage available for you to choose from, and if by re-mortgaging you can save between 0.75% and 1%, then it is likely a good idea. If you are at all not sure, there are online mortgage brokers offering free advice to those who would like to know more about how to refinance their property. With the online mortgage brokers’ expertise and connection with a network of lenders, they can hopefully help you with the refinance by sourcing a new loan with more competitive rates.
Using your Equity
If you have built up some equity in the property you own, this could be used to reduce the amount you would need to borrow with the refinancing package. Of course, the amount of equity would determine how much you could save. Do not forget to also add the costs of the refinancing, which might be minimal if you find the right mortgage broker. For many homeowners, it makes sense to use this equity, rather than just wait until you finish paying off the mortgage, and by talking to a local mortgage broker, you will be in a position to make an informed decision.
Using your built-up equity to repay some of the original loan means you need to borrow much less when refinancing, which would result in a significantly lower monthly repayment. As the circumstances of every person are different, you should make contact with a reputable mortgage broker who can ascertain all of the available options you can choose from and help you to come up with the right decision. Refinancing, unfortunately, is not for everyone, especially those with little or no equity, and by talking to an independent mortgage broker, you can have an unbiased, professional opinion from someone who is in the industry. By creating your very own household budget, you can calculate the monthly repayment that will suit you best and this will help to keep you on track.
Loan Term Extension
Extending the loan term can result in much lower monthly repayments, which is ideal if your current outgoings are high and meeting the mortgage repayment every month is a struggle. Of course, you pay more interest in the long-term, but having an affordable mortgage rather than one that stretches you to the limit is a very attractive proposition. If you seek the advice of your local mortgage broker, you will very quickly discover the pros and cons of refinancing, and with the help of experts, you can achieve your goal in the most cost-effective way possible.
If you would like to explore the potential that home refinancing can offer, an online search for a local mortgage broker will have you connected to an expert who can quickly ascertain whether or not refinancing is a good idea for you.