Better interest rates, lender service and investment opportunities often drive borrowers to consider refinancing their mortgage loans. Refinancing can be a practical solution only after a consideration of all the info about mortgage refinance.
What is refinancing
Refinancing refers to a new loan obtained by a borrower with an existing mortgage or loan. The proceeds of the new loan are used to pay off an existing mortgage for various reasons.
Change interest rate
Interest rates are some of the essential info about mortgage refinance that a borrower must consider. Loan agreements bear different rates depending on the circumstances of the borrower and of the market at the time the loan was obtained.
Interest rates fluctuate over time and may turn out to be lower when a loan is refinanced. Availing of lower rates can significantly reduce a borrower’s monthly repayments or shorten the loan term. In some instances, a previous mortgage may have been negotiated at a variable rate which the borrower may now wish to lock in by refinancing at a fixed rate.
A variable interest rate is one that changes as market rates change. With a variable rate, the repayment amounts will vary as the interest rate is computed at the time of payment. A fixed interest loan bears a specified rate which remains the same for the entire loan term regardless of the prevailing market interest rates. It can be advantageous for a borrower to lock in the rate when prevailing rates are relatively low. For a property investor, lower interest rates reduce the costs of the investment and ultimately may mean increased profits.
Free up equity
Refinancing an existing mortgage frees up the equity of property tied as security to the loan. The equity freed up can then be used to finance a new property investment, renovation or new car for the family.
Consolidate small loans
It’s also possible to refinance several small loans such as credit cards, personal loans and other debts by consolidating them into one loan with a single rate. The consolidation may result in a lower interest rate and consequently reduce the monthly repayments. Consolidation also makes it easy for a borrower to keep track of loan payments by monitoring a single account.
A refinanced loan is not a one-size-fit all solution as the circumstances of a previous loan and the present needs of the borrower will determine which options are appropriate and whether refinancing will provide more favorable terms.
Refinancing a mortgage or loan can entail additional costs which must first be weighed against the possible benefits. A borrower seeking to refinance should consult a mortgage broker, who can carefully assess your personal needs and provide you with info about mortgage refinance, recommend and find the best deals which suit the circumstances of the borrower.
You can find more information about the advantages of using a mortgage broker. Miriam Bronkhorst specializes in finding the right mortgage for your needs. Visit her at http://www.lendingplus.com.au
By Miriam Bronkhorst