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Why Homeowners Refinance Their Mortgages

Why Homeowners Refinance Their Mortgages

posted in Mortgage News

There can be many reasons why a homeowner might choose to refinance their mortgage; read on to find out about the most popular reasons, and learn whether it’s the right decision for you:

To get a mortgage with a lower rate and better terms

If your existing mortgage rate is higher than that of the market rate, and you still have a significant principal left on your loan, then you could make substantial savings when you remortgage your home for a lower rate. While it’s true that you’ll need to pay certain fees upfront to remortgage, the savings you can make on a long-term basis usually far outweigh the initial cost. To understand this in more detail, talk to an experienced mortgage broker in the locality.

To shorten your loan term

By increasing your monthly payments with re-amortization, changing the frequency at which you make payments, or selecting a shorter term, you can help pay off the principal quicker. This is especially useful if you’ve experienced a loss or decrease in income since you purchased your home, and if your current mortgage doesn’t allow you to make larger payments to pay it off faster, remortgaging might be a sensible option.

To take advantage of a favorable shift in the market

Understanding the current market and changing your loan, or switching between fixed and variable rate mortgages, can save you a lot of money. Lenders will typically allow a switch from variable to fixed, but not the other way round, whereas remortgaging gives you the opportunity to swap from fixed to variable. Doing so may mean that you get the best rate and make the most of your savings over time. Again, a mortgage broker can help you determine if this would be a savvy move.

To gain access to equity

Remortgaging your home could give you access to the equity you’ve built, and enable you to provide your family with more disposable income for major purchases or expenses, vacations, investments, education and even home improvements. It would be sensible to put this equity towards something that will give you a return, such as home improvements, which will ideally add value to your home, or an investment property that can be sold or rented out for a profit.

A reputable mortgage broker will advise you that it’s best to refinance your mortgage when your existing loan expires, as failure to wait could result in penalties. Also, if your credit score or financial circumstances have improved since you got your original mortgage, or interest rates have subsequently fallen, it might be sensible to refinance your mortgage. For more detailed advice and guidance about refinancing your mortgage, schedule a consultation with your trusted mortgage broker.


Mortgage News

09 dMar, 2021

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