Why Should You Refinance Your Home Loan? What Are The Benefits?

November 15, 2016

Why Should You Refinance Your Home Loan? What Are The Benefits?

Although many people are happy with their present home loan, you may be better off if you refinance. This is especially true if you have had your home mortgage for some time.

Here are some benefits that you may be able to get if you should decide to get a new home loan.

Get a lower interest rate

Probably the best reason to refinance a mortgage is to get a lower interest rate. If you have had your mortgage for several years, chances are, you obtained it when interest rates were much higher than they are now.

When you refinance, you may be eligible for much lower rates. This will result in lower monthly payments, which could result in more money left over at the end of each month.

Tap into your homes equity

After living in your home a few years, the equity in your home begins to increase in value. You can tap into that equity when you refinance, and then use that money any way you wish. You could also reinvest the money into your home by renovating it, or even putting on an addition or extension.

Pay off your home loan sooner

When you refinance your home loan, you could get terms that will enable you to pay it off sooner. With a lower interest rate, you could put much more money in your pocket each month and then apply some or all of it towards paying your mortgage off sooner. Another way to do this would be to obtain a shorter term loan, such as one for 15 years, and then you would pay much less in interest over the loan term.

Make fortnightly payments

Your overall interest can be reduced if you are allowed to make fortnightly payments. These can help cut down your overall interest because interest is usually calculated on a daily basis. Paying every two weeks means the new interest rate takes into account each payment and reduces the sum you owe that much faster.

Consolidate your debts

Refinancing your home loan can also enable you to pay off all of your other debts. Take out a new loan to refinance your home and add in the value of all your debt. Then pay off all your debt and you just have one payment to make each month. Because of having to pay interest on this debt for the life of the mortgage, however, it should only be considered as a last resort if no other options are available.

Get rid of unwanted mortgage features

In order to buy a new home, some people have little choice but to get their loan with less than the best choices. This can include Lender’s Mortgage Insurance (LMI), or perhaps a balloon payment. Refinancing may enable you to get more favorable terms and a better interest rate, too.

Refinancing your home loan can provide you with a number of new and worthwhile benefits. Compare costs and all fees before making your decision, but it is certainly possible to come out with a much better deal.

Written by Refinancing.com.au


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