Life is constantly in flux. Your family structure, lifestyle, or economic capabilities may have changed since you bought your house. There may be a better home loan option for you now that you'd like to grab.
If you compare house loans and find one that works better for you, you may decide to refinance. This requires transferring your loan from one lender to the next. Maybe you want a better rate, greater flexibility, a debt consolidation loan, or leverage your home's value to refurbish or invest.
While every homeowner has their own set of reasons for refinancing, the end objective is to keep more money for other long-term investments.
So, if you're considering refinancing your mortgage, here are the top compelling reasons to do so:
1. To Either Extend or Decrease the Duration of Your Loan
Based on your existing financial circumstances, you may choose to either lengthen your amortisation term to stretch out or contract your debt to pay it off sooner. If you reduce the duration of your loan, you'll have to plan for larger monthly payments. However, doing so will assist you in saving money since the amount of time you have to pay interest would be shortened.
When you prolong your amortisation term, however, you will be able to pay lowered repayments per month. The catch is that you will end up paying more due to increasing interest rates towards the completion of the loan term.
2. To Reduce Your Monthly Payment and Interest Rate
Mortgage charges have fallen significantly over the past years as the economy has settled into a much slower growth rate. It essentially implies that the current economy is maturing and will likely maintain lower rates for the foreseeable future.
Reduced interests result in lower monthly payments, and less interest paid over time. It makes perfect sense to secure your property at these rates and keep it that way on a long-term basis as much as possible.
Refinancing a mortgage to a cheaper interest rate will also help save up cash, allowing you to have additional emergency money, savings, or other investment opportunities.
3. To Pay for House Improvements and Renovations
If you own equity, you can convert it into cash through cash-out refinancing. This money can then be spent improving your home, doing some repairs, or even expanding it with an additional dwelling unit.
It is not surprising that as your family grows, you will need more room, repurpose property, or have major home repairs. When you go for refinancing, you can bring in elderly parents who may require additional care and support.
4. To Consolidate Financial Obligations
When you have additional obligations in addition to your mortgage, it is helpful to consolidate and streamline them into a single loan to simplify your financial situation. This is made possible through the use of refinancing.
Paying off personal debts fast by merging them into your house loan will help your budget. But be cautious because when you consolidate debts, you must make extra payments to keep interest costs from rising.
5. To Switch from an Adjustable Rate Mortgage (ARM) to a Fixed-Rate Mortgage
Mortgages with an adjustable rate give a cheaper interest rate at the outset, but the rate will rise or fall at a set time.
Many first-time buyers still go this route due to lower monthly payments. However, this can change because a low-fixed-rate mortgage ensures that the monthly principal and interest payments are constant throughout the term.
Conclusion
It is possible to save money by refinancing if it lowers your monthly mortgage payment, shortens the duration of your loan, consolidates your debt, or accelerates the growth of your home equity. A prudent homeowner is always looking for ways to save money, build equity, and pay off debt. More often than not, all that can be achieved through refinancing.
Wealthy You provides a range of mortgage options to help you achieve your financial goals and requirements. We have served Sydney with alternative mortgage funding for almost a decade, making refinancing your house easy and stress-free. Reach out to us today!
