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Is it time to refinance your mortgage?

It is important for you to consider the reasons why you want to refinance, and also the advantages and disadvantages of doing so.

Refinancing your mortgage means paying out your current home loan and replacing it with a new loan. You can refinance your loan internally with the same lender, or you can switch to a new lender altogether.

There are many reasons why homeowners choose to refinance their mortgage, some of the most common reasons are:

Debt consolidation

One of the most popular reasons people choose to refinance their mortgage is to consolidate their debts into one monthly payment. A mortgage will generally have a lower interest rate then most unsecured debts, so paying out your credit cards and personal loans by adding their balance to you home loan may save you thousands in interest payments. It will also give you peace of mind knowing that you have only one monthly commitment to pay.

Lower Interest Rates/Lower Fees.

If you are thinking about refinancing your home loan to a lower rate it is important to consider whether the new loan has higher fees and charges as this may be the reason for the new loans lower rate. A great way compare this is by looking at the comparison rate of the new loan as this will give you a true indication of the cost as the comparison rate takes into account the interest rate and all fees and charges associated with the loan.

As well as the comparison rate it is important to look at the features and benefits of the new loan. For example, are you are looking for an offset account linked to your mortgage, are you are looking for a redraw facility, or the ability to make additional payments without penalty. You will need to check exactly what the new loan offers.

Release of equity

Another popular reason people choose to refinance is to release the equity in their home. If your home is valued at more than the amount you owe on your home loan, you may be able to refinance your current loan to access some of that equity, depending on your lenders’ criteria.

The lender will have a valuation completed on your home to determine the current market value.

Some common reasons homeowners release equity is to purchase an investment property, buy a new car, complete minor renovations on their home, or sometimes just to take that well-earned holiday.

The lender will generally ask the reason why you are looking to release some or all of the equity in your home, and depending on their criteria may request additional paperwork.

Most experts advise you to review your mortgage once every two years as the market is always changing. If you are satisfied with your current home loan there is really no need to refinance.

However if you have made the decision to refinance whatever your reason is, and if you are well informed beforehand of the pros and cons, you will be confident that you are moving on to a mortgage that better suits you.

If you are looking to refinance your loan or would like a complimentary review of your current mortgage book an appointment and Ask Ang.

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