Home ownership is something that most people usually look forward to especially as they land their first decent job. However, it is not as easy as many people may think. After all, incomes usually rise much slower than living expenses. If you get married and have a few kids, your income may become insufficient. This can make your mortgage too expensive for you to afford. If you find yourself unable to service your mortgage accordingly, you should consider refinancing.
Below are several other reasons why a home owner may want to refinance home loan a few years into paying their mortgage:
i) To Reduce Interest Payments
If the prevailing market conditions have led to a reduction of interest rates, and you are currently servicing a high-interest fixed rate mortgage, remortgaging the house may be a great idea. You only need to search for a lender with the lowest rate of interest. Be sure to shop around and consult an independent mortgage broker to find the cheapest mortgages. Once you do, be sure to apply for mortgage refinance with them. The lender will pay the mortgage balance on your existing loan and issue a new mortgage under favorable terms and conditions. The reduction of interest rate can save you a lot of money over time. You can also have the mortgage rate fixed, in case you had an adjustable rate mortgage.
ii) Borrow Against the Equity in Your Home
After servicing your mortgage for a long time, you probably have a lot of equity built up in the property. This can be due to both property value appreciating and the payments you have made over the years. If you need a large loan, you can borrow the difference between the current market value of the property and the outstanding balance. This is usually a good idea because home loans are usually cheaper than car financing, personal loans and other types of loans.
iii) Reduce Monthly Payments
One of the main goals of refinance home loan is to reduce the amount of money paid every month. If you have serviced your mortgage without default for 10 or more years, you can refinance the mortgage to reset the term of the loan. By spreading the outstanding balance over a longer period of time, you will be able to reduce the monthly payments. This will allow you to service your mortgage conveniently and improve the quality of life you live at the same time.
While your mortgage lender may be willing to refinance your mortgage, the terms and conditions they offer may not be convenient. Therefore, you should not hesitate to shop around for the best offers.