Mortgage refinancing involves repaying your current mortgage and taking out a new loan with different terms, usually with the goal of obtaining better conditions. This can involve working with your existing lender or switching to a new one, depending on which best meets your needs.
There are various reasons why homeowners choose to refinance their mortgage. Some of the most common include:
•Reducing monthly payments: By extending the loan term or securing a lower interest rate, refinancing can help lower your monthly payments, providing more financial flexibility.
• Debt consolidation: If you have high-interest debt, such as credit card balances or personal loans, refinancing your mortgage to consolidate these debts can save you money and simplify your finances.
• Accessing equity: Refinancing can allow you to tap into your home's equity for various purposes, such as home renovations, education expenses, or investments.
Evaluating Your Current Mortgage:
Before considering refinancing, it's essential to evaluate your current mortgage to determine whether it's meeting your needs:
• Interest rate: Check if you are paying a competitive interest rate since you first obtained your mortgage.
• Loan term: Is the length of your mortgage term appropriate for your financial situation, or would you benefit from extending or shortening the term?
• Repayment flexibility: Does your current mortgage allow for extra repayments, lump sum payments, or other flexible repayment options that suit your financial goals?
When to Refinance Your Mortgage:
Timing is crucial when it comes to refinancing your mortgage. Here are some factors to consider when determining the best time to refinance:
•Interest rate environment: Keep an eye on market trends and consider refinancing when you are about to come off a fixed term to see if you can obtain a better rate with another Lender.
• Credit score improvements: If you are with a non-bank lender your credit score may have improved since you first obtained your mortgage, you may qualify for better loan terms with a mainstream lender.
• Equity accumulation: As you build equity in your home, refinancing can become more appealing, whether for accessing funds or securing better loan terms.
• Changes in financial circumstances: Major life events or changes in your financial situation such as a salary increase, windfall or expanding family, may warrant refinancing to better align with your needs.
Costs Associated with Refinancing:
This one can catch you out if you haven't been informed properly. While refinancing can lead to significant savings, it's important to consider the associated costs, which may include:
• Break fees: If you have a fixed-rate mortgage, it's essential to consider the potential costs of refinancing before your fixed term expires. Breaking a fixed-rate mortgage early, can result in break fees or penalties.
• Legal fees: You may need to work with a lawyer to handle the necessary documentation and registration, which can involve legal fees.
• Repayment of incentives: If your original mortgage included incentives, such as a cash back you may need to repay this if you refinance before the specified loyalty period ends.
So, if you’re considering refinancing your mortgage, get in touch to make sure it’s the right move for you. Stephen Massey – Mortgage Advisor and First Home Specialist, Call or Text 021 711 444.