Historically low interest rates are causing quite a stir, especially when some home owners are taking advantage of home loans with interest rates as low as 4.49 percent. In fact, these lower rates are enticing home loan holders with higher interest rates to consider refinancing their existing mortgage.
However, while now is an excellent time to shop for a new home loan, it’s also important that you consider all of your options and that you don’t rush your decision. Why? Well, because when it comes to refinancing there’s a right and a wrong way to go about changing your home loan.
How to Avoid Refinancing the Wrong Way
Refinancing can be an excellent way to lower your existing interest rate, to gain access to more home loan features and to consolidate your debt. You may also find that you gain better customer service. But, refinancing isn’t as simple as updating your existing home loan. If you elect to refinance, then you’ll need to take out a new mortgage and pay out your existing one. This means putting in a new home loan application and waiting for approval.
So, while refinancing sounds easy at first, for some it can be frustrating. If you’re looking to refinance, here are some pointers to help you overcome any refinancing problems:
1. Don’t refinance without doing your homework – It’s easy to make spontaneous decisions and to not carry out comparisons, especially if you’re limited for time. But rushing into refinancing can be costly. You can add thousands to your mortgage expenses and you can add years to your home loan term. To avoid this, research the mortgage market. Carry out comparisons and compare these to your existing mortgage.
2. Don’t go for the cheapest interest rate – While the cheapest interest rate is always enticing, it does not necessarily offer you the best deal. Always read the fine print of any offer and make sure you know exactly what you are getting. Some home loans offer you introductory rates that are low, but these then revert to much higher rates after a certain time has passed.
3. Don’t consolidate debts without aiming to make additional repayments – If you’re looking to reduce the number of monthly repayments you make by increasing your home loan and paying out your other debts, then make sure you pay more off your home loan than the minimum repayments. Failing to do this will see you paying far more in interest over the term of your loan. For example, adding your car loan to your mortgage, and then paying this off over 25-years will incur thousands more in interest. This means that the commodore you bought will cost you more than a brand new BMW.
Want to know how to refinance RIGHT? Yes, then contact eChoice and find the right home loan for YOU today.
Written by eChoice
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