Refinancing your mortgage effectively replaces your current home loan that you have now with a new one. Usually, people refinance to lower the interest rate, tap into the equity of their home, or cut back monthly costs by consolidating several loans into one. While some use a mortgage refinance to repay the loan faster, changing products or shifting from a loan that’s variable-rate to a fixed-rate loan. Before refinancing, check out the important steps and then assess the procedure and whether it works for you:
Why refinance your home loan?
Before starting, think about why you would like to refinance your home loan and what you are trying to achieve. Here are some of the benefits of refinancing your mortgage home loan:
Minimize the monthly payment
You could refinance into a loan with a lower interest rate if your aim to pay less each month. Also, you can opt to extend the loan term since it is one of the ways you can minimize the monthly payment. However, extending the term means that you will be paying more interest for a longer time.
Tap into equity
The lender can provide you with “cash-out” if you plan to refinance to borrow greater than you currently owe on your existing loan. This is known as a cash-out refinance. Most people usually receive a lower interest rate and a cash-out refinance simultaneously.
Buy an Investment Property
You can use the equity in your current home as a “deposit” to purchase an Investment Property. You refinance your existing mortgage and do a “cash-out” by increasing the mortgage limit up by the required deposit. As will you be increasing your total loan limits, be sure to ask the bank or adviser about interest discounts for high borrowing levels.
You can also simply use the existing property as collateral (using equity) to purchase the Investment Property. There are pros and cons for this method and it best to discuss this with your Mortgage professional.
Pay off the loan faster
Once you refinance from a mortgage for 30 years into a 15-year loan, you will repay the loan in half the time. Consequently, you will pay reduced interest over your loan’s existence. There are advantages and disadvantages when it comes to a 15-year loan. One of the disadvantages of this loan is that monthly payments increase.
Remove Mortgage Insurance
Conventional home loans or private mortgage insurance could be waived, however, in most cases, it is not possible. The only way to remove the insurance premium would be to refinance the loan or sell the home as soon as you have gathered sufficient equity.
Change from a variable-rate to a fixed-rate loan
Variable-rate mortgage interest rates can increase or lower from time after time. Meanwhile, fixed-rate loans remain the same. To get financial stability, to refinance from a variable (SVR) to a fixed-rate loan would be beneficial, especially if you want to have steady payments.
Are you planning to purchase a home or investment property? Joondalup Home Loans would love to assist you with that. Joondalup Home Loans is 100% Australian-owned that offers competitive rates, advanced finance solutions, superior services, and fast response time. We also offer a comparison of investment or home loan costs and interest rates all over various lenders to help you have a greater deal.
Get a better mortgage deal and rest assured that our staff is accommodating, friendly, and would love to assist you. Visit our website now to learn more or you can contact us directly. You can begin saving now and it has never been a better time to change your home loan into something better.