Mortgage payments - they're always there in the back of your mind. You think about it before buying a new car, getting a gift for your spouse or taking the family on a vacation.
But it doesn't have to be this way. You shouldn't have to pull out a calculator every time to check if you can afford your next expense or not.
Is there a way to get better interest rates on your existing mortgage and pay it off faster?
The answer is yes! And the only way to achieve this is refinancing.
What is refinancing?
A mortgage refinance is a simple process of substituting your old, higher interest loan with a new one at today’s lower interest rates, to reduce the payments or shorten the term.
When should you refinance your mortgage?
Fair question. Just because you can substitute your old loan for a new one doesn't mean you have to. In short, only go for refinancing if the new mortgage offers more favourable conditions.
Refinancing might be right for you if:
- The new loan has a shorter term
No homeowner wants to wait for decades to pay off their mortgage. We understand your urge to get rid of your mortgage payments as soon as you can. So, if the refinanced mortgage offers a shorter term, you should ideally go for it.
- The new interest rate is lower
Just a minor decrease in the interest rates can save you thousands of dollars. But remember not to lower your mortgage repayments if interest rates fall. Resist the urge of paying less on your loan just to have a little more spending money - strive to pay off your whole mortgage as soon as you can.
- The terms of the refinanced mortgage are better
You should carefully review the terms and conditions on both mortgages before making a decision. Sometimes, it's easy to get lured by a shorter term or a lower interest rate without really considering other risks that might be lurking somewhere in the new contract.
What are the benefits of refinancing?
1. Better mortgage rates
A lower mortgage rate is what attracts most people to refinancing. Why pay more when you can pay less? If the mortgage rates have fallen or you have managed to find a lender who's willing to lend to you at a lower rate, you should definitely consider refinancing as soon as you can.
2. Flexibility to reduce the term
Most homeowners have accepted the norm that they need three decades to pay off their mortgage and finally become debt-free. This is simply not true! You don't have to spend half of your life worrying about mortgage payments. You can always refinance your home loan to a shorter term. For example, a 30-year term can be shortened to a 15-year term through refinancing.
3. Debt consolidation
If you have large debts, such as a credit card debt, you might be able to consolidate this debt into a single mortgage with a single lender and lower rates. This can also help reduce a lot of financial stress that comes along with huge debts.
Remember the Three R’s – Review, Refix, and Refinance
Review your mortgage regularly, and see if you can get a better deal with your own lender or with another lender. This is where we can help you – we’ve got the experience in talking with lenders to get you a better deal.
Get in touch now if you want to free yourself from the chains of mortgage faster!
(All the information in this article is for educational purposes and should not be used a legal advice)