At certain times and in certain circumstances it actually makes more sense for a homeowner to refinance a home loan than to stay with their current lender and ride the waves of ever changing interest rates.
This article looks at five specific reasons to refinance but first things first. The information contained in this article does not constitute personal advice and because your circumstances and financial position are as unique as you are, you should seek professional, specific advice before to ensure the best decision for you in your current financial situation.
If your mortgage introductory or variable adjustable rate period is about to increase, you may save substantial money over the period of your loan if you refinance. You avoid having to start paying your mortgage lender’s variable rate of interest which is highly likely to begin at least one percentage point above that which you have already been paying and which could increase your monthly outgoings significantly. Over the lifetime of your loan just a one percent increase will result in you paying back thousands in extra interest payments – money you could save towards retirement, put in a fund for your kid’s college education or use to actually pay off your mortgage faster…which leads me neatly to the next point!
Many lenders are trying to attract your new business and will offer you attractive refinance rates now which will reduce the amount you’re already paying. If you can currently afford what you’re paying why not forego the reduction and instead continue paying the same amount with the new lender and pay back your mortgage quicker. The years or even months you can shave off the term of your loan are years or months without interest payments which are years or months you’ll be significantly wealthier.
If you’re not wholly comfortable with your current monthly repayments then ignore point 2 and look at refinancing with a cheaper lender and taking the discount.
Make life simpler by considering a fixed rate mortgage so you don’t have to worry about interest rate fluctuations and can budget more effectively.
If you have accrued equity on your property you could consider refinancing up to the new value of your property and using the additional funds to buy an investment property from which you could either draw down a regular income in the form of rent or which you could use for capital appreciation purposes.
Examine your options carefully and remember to look at the bigger picture! If you can profit from a re-mortgage then take the deal, but get expert advice and assistance before entering into any investment decision.