Once the initial euphoria of being a homeowner starts to wear off, paying off the mortgage can seem like a burden. This is where a mortgage refinance can help you. The mortgage market is incredibly competitive with numerous lenders trying to outdo each other by providing lower interest rates and more benefits. As a borrower, this puts you in an ideal position to make the most out of the competitive market scenario. Opting for a mortgage refinance is a great way to reduce your monthly payments, secure better interest rates or pay off your mortgage faster.
What is home loan refinancing?
In simple terms, a mortgage or home loan refinance is the process of swapping your existing home loan for a new one from another lender. It is usually done in a bid to secure competitive interest rates or better features that will help ease the mortgage burden. However, before applying for a home loan refinance, you should check if you are out of the lock-in period or else you may attract a penalty from your existing lender.
What are the benefits of refinancing home loans?
Refinancing home loans can offer you plenty of benefits when done for the right reasons. Here are some of the most important benefits of home loan refinancing:
- Lowers your monthly instalments
- Lowers lifetime interest costs
- Additional financing for other purposes
- Consolidate unsecured debts at lower interest rates
When is the right time to refinance home loans?
You can opt for a home loan refinance for a number of reasons depending on your current financial situation. A home loan refinance makes sense when:
You want better mortgage features
With a mortgage refinance, you can switch to a mortgage loan with better features such as offset account, ability to redraw for no extra cost, loyalty rate reductions etc. At times, mortgage features like this can help you save costs and pay off your mortgage more conveniently.
You want to lower interest rates/monthly installment amount
A lower interest rate is one of the prime reasons for home loan refinancing. Most housing loan packages offer lower interest rates, also known as teaser rates, for the initial 2-3 years, after which the increase the rates gradually increase over the remaining term. By refinancing your mortgage, your loan is reset to the teaser interest rate all over again. A lower interest rate will ultimately translate to a lower monthly instalments, thereby offering you some financial relief.
You want to cash in on your home loan equity
Over the years, your mortgaged property will appreciate in value. By opting for a home loan refinance after your property has gathered some equity, you can avail a greater loan amount and use it for various financial needs.
How to make the right refinancing decision?
Once you’ve determined it’s the right time to refinance your mortgage, you need to opt for the best options. Given the number of refinancing options available in the market, choosing the right one can seem confusing. Using a mortgage refinance calculator will help you make an informed decision by giving you a rough idea about your new interest rate and your new loan amount. Once you input the data, the mortgage refinance calculator will give you an estimate of your new monthly payments and lifetime savings. Ultimately, these indicative figures will help you secure a better deal for your mortgage refinance.
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