Is Mortgage Refinance Your Best Option?

Refinancing Your Mortgage

With the amount of competition in today's home lending market, we are constantly being tempted to refinance our mortgages. We are tempted with special deals including low honeymoon interest rates and other special offers. But is it a good idea to refinance your mortgage and what do you need to consider before deciding to refinance?

Why refinance my mortgage?

There are a number of reasons why you may wish to refinance your mortgage.

You may want to take advantage of a lower interest rate being offered by another mortgage provider.

You may want to borrow extra money for renovations or other home improvements such as landscaping or redecorating.

You may want to consolidate all your debts into one easy to repay loan.

What options do I have when considering mortgage refinance?

You have a number of options available to you when considering refinancing your mortgage. Firstly, you may wish to refinance with your existing mortgage provider. You will generally consider this when you want to borrow extra funds against the equity in your home. This has been a popular option with many home owners who have found the equity in their homes increasing rapidly thanks to the booming property market.

Another option is to refinance with another mortgage provider. This will generally occur when you want to take advantage of a lower interest rate in order to reduce your monthly repayments or to save money on your total mortgage repayments.

When considering options for refinancing your mortgage, you may wish to do it yourself or you may decide to get professional help from a mortgage broker. A mortgage broker can help you find the best possible deal for your own personal situation.

What must I consider before refinancing my mortgage?

Before deciding to go ahead with refinancing your mortgage there are several issues you will need to consider carefully. If you are borrowing extra against the equity in your home, you need to assess whether you can really afford the extra repayments. And while you may have extra equity in your home during booms in the property market, what will happen if the property market drops by 10, 15 or even 20 percent? Will you still have enough equity in your home?

If you are refinancing your mortgage with another provider, then you will need to carefully check that you will actually be better off. You should firstly answer the following questions:

Will there be any fees or charges for paying out my existing home loan early?

Do I have a fixed rate portion on my home loan that I may not be able to repay early?

Is the interest rate with the mortgage provider I am refinancing with a honeymoon rate only? If so, what will the interest rate revert to at the end of the honeymoon period (generally 3 or 6 months)?

Will I actually be better off if I refinance? If you have only had your existing loan for a couple of years or less, then it may not be worth refinancing with another mortgage provider.

What fees and charges will I have to pay on the new mortgage? Will this be more or less than my existing mortgage?

Will I have the option to pay my entire salary into the mortgage and redraw funds as needed? This option may help you repay your mortgage sooner.

What to consider when being advised on mortgage refinance

If you decide to seek professional advice from a mortgage broker, there are several things you will need to consider. Firstly, you need to know whether the mortgage broker deals with a wide range of mortgage providers in order to obtain the best possible deal for you. You also need to be aware that mortgage brokers generally receive commissions from mortgage providers, so you need to feel confident that the mortgage broker is acting in your best interests. If you feel this may not be the case, then seek the advice of a second mortgage broker.

Posted in: Mortgage,Option,Refinance