Refinancing your home mortgage gives you the opportunity to replace an older secure loan with a new loan secured by the same assets. The refinancing process is similar to the one you went through with your original mortgage loan.
Typically home refinancing is done when you have a mortgage on your home and apply for a second loan to pay off the first one. While taking the decision to go for the home refinancing option, it is important to first determine whether the amount you save on interests balances the amount of fees payable during refinancing.
Imagine a scenario where you can have access to extra cash, while simultaneously lowering your monthly mortgage payment. This dream can become a reality through mortgage refinancing.
A house is the largest asset you may ever own. Likewise, your mortgage payment may be the largest expense you’ll have in your monthly budget. Wouldn’t it be great to use this asset to reduce your monthly payment and put extra cash in your pocket? When you refinance your mortgage, you can take advantage of the equity in your home and enable this to take place.
Note: Refinancing may result in the total finance charges being higher over the life of the loan. Make sure to discuss any questions you have, about closing costs, with your Mortgage Loan Originator.
It’s important to know your options. There are hundreds of home loan products on the market; all with different fees, interest rates and features. Let’s have a look at the most common home refinance loan types.
As the name suggests, this loans interest rate changes through the life of the loan. Initial interest rate of the loan is fixed for a set amount of years and then it adjusts according to the economic index it is linked to. This means it can go up or down after the fixed interest period. Initial fixed rate of the loan is typically lower then that of a fixed rate home loan. Refinance to this if you are certain interest rates will stay low or drop.
This loan fixes your interest rate for a set period of time. This allows you to budget effectively and gives you peace of mind for that period; knowing your monthly payments won’t change. The downside is this loan comes with less features, therefore less flexibility. Most don’t allow you to make extra payments and redraw on the additional funds.