Thursday, June 4, 2015
Smart People Refinance Smart
One thing that you should look at before refinancing is whether or not it is really right for you. There are a number of costs involved, such as legal fees and penalties for refinancing mortgages.
If you are having trouble paying your current mortgage, or you think that you are not receiving the best deal you possibly can, then perhaps it is time to think about a new refinanced mortgage. However, many people are unsure about the relative benefits and problems of a today's mortgages. Here are some useful tips to help you decide if remortgaging is right for you:
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What is a refinance?
A refinance is when you replace your existing mortgage loan with a new one from either the same lender or a new lending company. This is usually done to reduce monthly payments or to release home equity. Remortgaging is usually carried out through a refinance broker, your local bank and even your credit union.
Refinancing for lower payments
One of the most common reasons to refinance is to get lower monthly payments than you do now. If you are struggling right now to pay off your monthly payments, then you need to look for a better deal. If you can find one, then ask your current mortgage lender if they can match this, as they would prefer to keep you as a customer at a lower rate than lose you altogether. If they cannot match the rate, then you should look at remortgaging at the better rate.
Refinance to release equity
Another reason why people refiance is to get hold of some extra money by releasing the equity they have built up in their property. This means that you borrow more than your current mortgage debt to release the money you have already paid into the property. This is especially useful if your property has gone up in price or if you have paid off a large percentage of your mortgage. It is like getting out a loan, but the rates are low as they are part of the remortgage.
Of course, the main advantage of getting a refinance is that you can reduce your monthly payments. This might help you be more financially stable and secure, as you don’t have to struggle to meet the payments. Refinancing can also free up money through releasing equity, which could help you to make home improvements or to clear other debts.
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One thing that you should look at before rerefinancing is whether or not it is really right for you. There are a number of costs involved, such as legal fees and penalties for changing mortgages. These fees can add up and might be more than you can afford. Also, if you borrow more money or you get lower monthly payments, it most likely means you will be paying the money back for a longer period of time. Although it may seem helpful now, you will probably end up paying more long-term, and if you are still paying the money back when you retired you might be left unable to make the payments.
Refinancing can help you if you are struggling with payments or you need to free up some money. However, you should think carefully about whether or not remortgaging will be beneficial to you in the long-term.