Refinancing has become a valid option for many individuals with high interest rates on their mortgage. Refinancing is essentially a replacement loan, with a different lender and (hopefully) a lower interest rate.So why would you choose to refinance?
- You may be able to take advantage of lower interest rates.
- You may also be able to extend
repayment period of your mortgage. While you will end up paying more in interest charges for this, this will reduce your monthly outgoings.
- You may be able to switch from a variable rate to a fixed rate mortgage, giving you greater security in
future from potential rate increases.
- You may also be able to increase
amount of your mortgage, to pay off other, higher interest rate liabilities such as credit card debt, cell phone debt and personal loan debt. This will enable you to save money on interest rate charges
Why would you avoid refinance?
If you decide to borrow more than your existing mortgage, you need to be wary of your budget. If you default on your payments you run
risk of losing your house.
If you do not calculate
costs involved with refinancing correctly, you could end up paying more in interest charges.
Thoroughly review
contract of your existing loan, an early pay out could involve a penalty that would negate
benefits of refinancing.