Refinancing gives a homeowner access to a new mortgage replacing their existing one. The new mortgage may have a different mortgage rate, loan length and amount borrowed which in turn can reduce the monthly mortgage payment, make cash available to use for renovations for example among other things. is it time to Refinance?
Your needs today may not be the same as when you first took out your mortgage. So how do you know it’s a great time to refinance? Here are some factors to consider when looking at refinancing:
1. Bringing all your debts together
You can refinance more than just your mortgage. Bringing all of your debts such as credit cards and car loans together could reduce your monthly fees and streamline your repayments. You’ll have one lump sum leaving your account each month making budgeting easier to manage.
2. Fees (and hidden costs)
It’s important to calculate the cost of refinancing as it may not be an option once you add up all the fees and costs. For example some banks have a good front line rate but lots of fees or restriction on the use of the loan resulting in higher costs overall. Regardless of how appealing a low interest rate can be, it's important to work out what other costs may apply when switching lenders such as discharge and application fees.
3. Improving credit history
Refinancing in some situations can assist in improving your credit score but it’s important to note by refinancing, lenders will be accessing your credit file and running a credit report.
In a normal refinancing case, you most likely won't see a big difference in your credit health, but don't be surprised if your new loan results in some minimal changes. Ensure you keep a check of your credit file to ensure all the details are correct.
Here at Focus Wealth we can assist you to improve and protect your credit history and how changes to your credit file are recorded and can affect how you are viewed by a bank.
5. Cash out or cash in?
In a cash out refinance, the refinance mortgage may feature a lower mortgage rate than the original home loan; to provide cash for home improvements or if your financial situation has changed that you need some extra cash.
With a cash in refinance, a homeowner brings cash in order to pay down the loan balance and the amount owed to the bank. By doing so you may get access to lower mortgage rates which are only available at lower loan-to-values.
You may also be in a position to use the equity of an existing property. Here at Focus Property Wealth we can show you how to structure correctly and educate on ways to structure to meet your goals faster.
Is it time for you to refinance?
If you don’t know where to start and think refinancing is time consuming, that’s where we can help!
Click here to see how!