REFINANCE

REFINANCE

Why refinance a mortgage?

A lot of things can change over the course of a mortgage. The holder can get promoted at work, or they can switch careers. Interest rates can rise or fall and home renovations can add significant value onto the price of the mortgaged property. All these things will have an impact on whether a person decides to refinance their home. While this is a decision that should not be taken lightly, it is something, if carried out in the right financial circumstances and with the right advice, that can prove very lucrative for the borrower. Here’s how it works.

What is home refinancing?

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If you’re not sure what refinancing a home actually means, it is pretty simple. It is the act of replacing your old mortgage with a new one. It is a fairly common practice people carry out to help negotiate a better interest rate on their home loan, to cancel mortgage insurance premiums or as a way to raise cash for improvements on their property. The old mortgage is paid off, which means the borrower is then free to arrange a new loan on more advantageous terms. For people with a good credit rating refinancing is a great way to convert adjustable-rate loans to fixed-rate ones and ultimately lower their overall mortgage costs. If it is something you are considering make sure and discuss all the available options with your lender.

Should I consider refinancing?

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Before absolutely committing to home refinance there are a few things to take into account. The big one is how you will repay the loan. For instance, if you’re continuing to invest in the property then great, the resale value of the house will increase and this money could be used to pay back the mortgage. The best thing to do is sit down with your lender and have an open discussion about your current financial situation and the best route to go down. It could be that it is the perfect time for you to refinance, or it might be best to hold off.

Am I eligible?

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Your lender will ultimately determine your eligibility but there are a couple of common criteria most will require you to meet. The main one being that you’ve had your original mortgage for at least 12 months. In a lot of cases it makes most sense to take the loan out with your original lender, as they will usually waive some of the additional costs like a second property appraisal, although this is not always the case. Of course, it is always good practice to see what else is on the market before making a final decision.

What are the advantages?

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We hope we’ve made it clear so far that home refinancing can be a rewarding endeavour. The first, and most obvious, benefit is lower interest rates. Over the years people start to earn higher wages, and pay down debt and as a result their credit rating improves. When this happens it often makes sense to renegotiate your home loan to help lower the cost of your repayments.
Alternatively you might currently have an adjustable-rate mortgage where the interest rates are increasing exponentially and you want to move to the repayment rates available on a fixed-rate mortgage. If these lower rates can be secured it can make a huge difference to monthly repayments and save the homeowner hundreds, if not thousands of pounds, over the duration of their loan.

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Away from attempting to arrange lower repayment rates there is a second reason why a borrower might choose to take out another home loan. This comes down to the equity on their property. For example, say you are currently contemplating making a relatively expensive purchase but you don’t have the cash available for it. It could be booking a luxury holiday or buying a new car. One way of getting the money for this purchase is to take out equity on your property as a line of credit. Here’s how it works. The house is appraised by the lender and then the lender decides how much of this amount they are willing to make available. The balance on the current mortgage is paid off and whatever remains is given to the borrower. This can be a terrific form of financing if the property’s value has risen significantly since the original mortgage was taken out.

What are the disadvantages?

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There are really no disadvantages to refinancing once a reputable lender has decided that refinancing at lower interest rates is will save you money on a monthly basis. Refinancing does have some associated costs involved and may add to the principal balance of your existing loan. For this reason, transparency from your lender is very important. They should break down exactly what your monthly savings will be once your new home loan has been arranged and show you why it makes financial sense for you to refinance your home. We have helped borrowers refinance all over the US and will give you a free evaluation to make sure that arranging a new home loan makes financial sense for your current situation.

Why refinance with SimpleFastMortgage.com?

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You might think that refinancing is a long and potentially costly process, but that is not necessarily the case. It fact, refinancing can be carried out quickly and often with very little costs involved at all. You just need to find the right lender. That’s where we can help. We have decades of experience offering candid advice to people of all backgrounds. We take pride in our customer service and provide frank assessments at every step of the process so there are no hidden fees or charges.
If you have any questions at all, want to know a bit extra about home finance or simply wish to know a bit more about your options, please get in touch and we’ll do our very best to answer any and all questions. We’re open five days a week, from 9am – 5pm.

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