Many mortgage borrowers see home refinancing as an excellent option to take. For the uninitiated, it entails a change in the loan term agreement from an existing debt to a new one under the same or a different lender. For the most part, these changes include the interest rate, payment schedule, and other terms in the loan agreement, which should be better than the existing home loan.
There are a handful of reasons borrowers consider taking this route. With plenty of flexible and competitive loan features, it can be a good idea to take advantage of them. Here are six valuable benefits to having your home loan refinanced:
1. Mortgage payment reduction
In general, people want to refinance their mortgage loans to reduce their monthly mortgage payments. They look for other lenders that offer lower interest or a better deal from their current lender. If you have some difficulties paying your current mortgage or have chanced upon a better deal, you may want to take the plunge into refinancing.
2. Shorter loan term
Some mortgage borrowers with a good source of income are looking to pay off their loans earlier. Unfortunately, their loans are stuck with a prepayment penalty. Therefore, they consider refinancing their loans to have a shorter loan term. Instead of a 30-year loan term, they opt for a loan to be paid off 15 years. If you ever consider reducing your loan term, apply for refinancing.
3. Easy application and process
Looking for a lender to finance your prospective house can be quite challenging the first time. You have the deal with the entire process—from preparing paperwork to negotiating down to closing the deal. However, refinancing will no longer be difficult for you as you know what to do and who to talk to. All you have to do is check your current financial situation, compare rates from various lenders, apply, and get approved.
4. Switch from a variable to fixed-rate loan
Another reason mortgage borrowers apply for a home refinancing is to switch from a variable to a fixed-rate loan. A fixed loan is a lot easier to deal with, as there are no monthly payment changes. If you are currently with a variable rate loan, shop around for a lower and fixed interest rate, and apply for refinancing.
5. Access to home equity
A home equity loan is a loan secured by a second mortgage that allows you to borrow against your home’s equity. It means that you can access the money you’ve already paid off on your existing home loan to fund it. You can use this money to make big purchases, such as a home renovation, travel, or urgent payment for medical expenses.
6. Debts consolidation
Some people consider refinancing their home loans to consolidate all their debts. What’s good about a home loan is that it generally has a lower interest rate than most credit cards and personal loans. By consolidating all your debts into one, you’ll pay less and save up in the long run.
Conclusion
Home refinancing is an excellent way to get better loan terms and help you settle your debt in time. With the right loan agreement, you’ll take advantage of the following benefits—mortgage payment reduction, shorter loan term, easy application and process, a switch from a variable to a fixed-rate loan, access to home equity, and debt consolidation. Just be sure to get the right loan term and deal with the best lender.
Looking to refinance your home loan? We have a team of qualified, trained, and experienced professionals in Perth who can help you get better loans. Get in touch with our mortgage experts today!