If you own a home with a mortgage, you have probably heard about refinancing many times, and now you’re thinking whether or not it’s something that you should do.
Refinancing is basically switching from your original loan to a new one. There are many reasons homeowners would want to do this. Here are some of them so that you can determine whether or not they apply to you:
You want to lower your monthly payment
If you notice that the prevailing rates are significantly lower than when you got your mortgage, you may opt to refinance your mortgage into a loan with a lower rate. You will pay less over the life of the loan because refinancing can reduce the interest rate and lower your monthly repayments.
In the case that there is no significant drop in the rates, but you expect a decrease in your income, you may refinance your loan to lengthen it. This will allow you to pay off the loan gradually with possibly lower monthly payments.
Another instance you may want to refinance your mortgage is when your property’s value has gone up or you have paid off a considerable chunk of your loan. The additional home equity will make your Loan-To-Security (LVR) ratio smaller, which will help you get lower your monthly payment and perhaps a lower rate.
Your credit score has improved
Has your credit score significantly improved since the loan was first taken out? Consider refinancing your mortgage to get a better rate. That’s why it pays to make an effort to build and monitor your credit score, as it may save you a lot of money in the future.
Your fixed period is almost up
If your fixed interest rate is maturing, it is worth comparing what rate your current lender will be offering you (fixed or variable) with what othe lenders may be offering.
Unfortunately, too often your lender is more focused on attracting new customers rather than looking after existing ones that have been loyal and making regular repayments as required.
You can afford to pay more
If you have recently received a boost in your finances that now allows you to pay more off your mortgage, you can refinance it into a shorter loan so that you can pay it off faster. That way, you get to save a lot of money in interest payments.
You need cash
If you need extra money for other expenses and you don’t have access to other funds, you can refinance your mortgage. It works by refinancing your existing home equity into cash and you will get a new larger loan. However, this is riskier, which is why it has higher interest rates.
Refinancing your mortgage to reduce monthly payments and lower interest rates is worth exploring. It’s a viable option for homeowners who have good credit, but it can be risky for homeowners who don’t. Consider consulting a finance professional to help you make the right decision for your mortgage refinance.
Do you need help with your home loans in North Sydney? Our team at Brickhill can help you select and arrange the funding of your home. Contact us today!