Should You Refinance your Mortgage?
Refinancing your home loan involves renegotiating your mortgage payment terms and eventually obtaining a new mortgage. Often, the end goal could be to reduce mortgage interest (and in so doing also reduce monthly payments), change mortgage companies, and even to take out some cash out of your home to help make a substantial purchase.
Many new homeowners find that as they continue to earn more money down their career, they are able to pay their bills on time and thus improve their credit score. With a clean credit score, the homeowner can then approach their lender to renegotiate the home loan terms.
There are some pros and cons for each side of the home mortgage refinance equation: Benefits of Refinancing your Home
- Same Financier, Same Re-financier
While most banks and lenders will require that the borrower maintains their initial home loan package for at least 12 months, not all lenders require this and one can check with different lenders prior to taking out the original mortgage. Yet, most lenders will still prefer to keep the customer and re-offer the refinance home loan with new, reduced interest rate especially if the borrower has been paying their dues considerably well.
- Reduced interest, Reduced Monthly Payments
This is perhaps the most quoted reason for taking up a mortgage refinance. Over time, a reduced refinance home loan interest can have a profound impact on the amount that has to be paid at the end of each month.
- More savings, Less Hassles
That can result in savings amounting to hundreds of dollars annually. Not to mention the increased revenue the homeowner may get to make other purchases such as home improvement supplies to renovate and help increase the value of the home. Increased home value can help the borrower to procure and obtain a favorable line of home equity credit in addition to reducing their mortgage balance. The savings could also be used to remove unnecessary credit card debt to help bolster the borrower’s credit score.
- To help Avoid lender Mortgage Insurance (LMI)
LMI is applied to help protect lenders against buyers/borrowers with an elevated loan-defaulting risk. LMI is required when a home buyer wants to make the purchase with less than 20 percent down payment, or even 0 percent down. However, as the value of the home increases and the borrower makes the monthly payments, the lender can decide to banish the LMI bit off the contract. Or the buyer can make the appeal by seeking a refinance home loan.
In the end, the decision on whether to take up the mortgage refinance or not may come down to examining the balance between the benefits/savings and costs of a home refinance plan. If the balance is worth the while in the long run, then mortgage refinance may be the wise option to take on. If not, the refinancing plan may not be worth it. For example, if one plans on living in the house for long, the benefits of negotiating a mortgage refinance can beat the costs.
To learn more about our home refinancing package and the benefits that await you, you are welcome to get in touch with Mr Broker for an inclusive and hassles-free home loan plan to fit your life and style.