Have you conducted a home loan health check lately? You might be surprised if you find out that despite getting a pretty good loan back then, there is still some room for you to save. The solution does not lie on your current home loan. What you might want to do is try to look at what’s out there for you if you wish to find ways to reduce your monthly mortgage costs.
A lot of people today are actually dealing with higher interest rates, which mean they have to pay bigger interest payments. The situation is the perfect time to find a better deal in the market. And once the opportunity to refinance to a better mortgage product reveals itself, you don’t let it pass. However, you do need to consult with your lender or a separate mortgage expert regarding your situation. Refinancing mortgage, just like other home loan solutions, has advantages and disadvantages. Before you can refinance, you will have to deal with the refinancing costs which will be comprised most likely of exit fees and several other charges your lender might impose.
Benefits of Refinancing to a New Loan
Refinancing to a new loan has other advantages aside from the obvious fact that of allowing people to lower their mortgage costs. Refinancing loans allows you to use the equity stored in your home as guarantee for a new loan. You can use the loan to fund the renovation and of your property. You can also purchase an investment property if you want using the funds you get from the refinancing home loan. Last but not the least, refinancing allows you to easily consolidate your loans as well as unsecured debts (e.g. credit card and personal loan) into one so you won’t have to pay high interest rates. The best thing about debt consolidation is that it makes debt management easy because you only have to manage a single account.
You can take advantage of refinancing when the interest rates are down. Once you have secured a loan, you can lock it in fixed rate for 15 to 30 years in order to preserve the low interest rate. When the rates go up, you’ll be saving a lot compared to those with variable rate loans. However, refinancing to a variable rate loan is the better option if you are not permanently settling in your home.
Refinancing mortgage takes you back to step one when you first applied for a mortgage. And if you remember, you need to have a cautious approach because you do not want to defeat the purpose of your refinancing. Simply put it, it’s buying your first all over again, which means you might encounter the same obstacles and procedures.
By Robert Charlson