Mortgage Refinancing and Terms Improvement: The Guide to Huge Savings
Many tend to think that a mortgage is a "Catholic wedding" for 25 or 30 years, and that once we've signed - that's it. But the truth is that a mortgage is a dynamic product. The market changes, interest rates in the economy rise and fall, and your personal situation also changes (promotion at work, inheritance, or heaven forbid a decrease in income). Mortgage refinancing and terms improvement is a powerful financial tool that allows you to open your existing mortgage and rebuild it under better terms.
What is Mortgage Refinancing Actually?
Mortgage refinancing is a process where we take a new mortgage to pay off the old mortgage. The goal is almost always one of two things: either to reduce the monthly payment to ease the current financial burden, or to shorten the mortgage period to save on accumulated interest payments and finish with the debt faster. Often, through proper mortgage consultation, it's possible to achieve both goals together.
When Should You Check Refinancing Feasibility?
There are several junctures where you must check your mortgage:
1. Changes in market interest rates: If you took a mortgage during a period of high interest rates and rates have now dropped, there's potential for tremendous savings.
2. Changes in financial status: If your income has increased, consider increasing the monthly payment and shortening the term. This will save you a lot of money.
3. Receiving a lump sum: Released continuing education fund or inheritance can be used to pay off part of the mortgage through refinancing.
4. Difficulty with monthly payments: If you're experiencing cash flow difficulties, refinancing can restructure the loan and reduce monthly payments.
Early Repayment Fees - The Big Trap
One of the important things in checking refinancing feasibility is the early repayment fee (exit penalty). Sometimes the interest savings are large, but the penalty makes the move unprofitable. A mortgage advisor for housing improvers and refinancers will perform an accurate calculation for you including all associated fees, to ensure you're actually saving net money and not just "on paper".
Warm recommendation: Don't let your mortgage "sleep" for long years without checking. A feasibility check for refinancing once every year or two could be worth a lot of money to you. Contact us for a professional check without obligation.