6 Reasons to refinance your home
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PThe majority of people who buy their own home will need to take out a mortgage as a loan. Houses are extremely expensive and there are very few people who will be able to buy in cash. Once you’ve got your mortgage, you will have it until you’ve paid out the total amount that you bought the house for. As well as that, you will need to pay a set amount of interest that will be added onto your monthly repayments.
Even though you will be stuck with a mortgage until you have paid off the entire loan, you won’t necessarily have to stick to the same mortgage from the same provider. It is possible to refinance your home in order to take out a different mortgage to cover the loan.
Of course, if you do want to refinance your home, you will need a good reason to do so. It will also need to be beneficial to do so or else you might find that your finances take a dip for refinancing at the wrong time. Here are some situations in which it is certainly worth thinking about finding a different mortgage and refinancing.
1. You Might Be Able To Find A Better Mortgage Rate
One of the main reasons why people think about refinancing their home is because it gives them the chance to find a better mortgage rate. As I’ve previously mentioned, there will be interest added to your loan but the rate of interest will depend on your provider. They will be the ones to decide how much you will need to repay along with the loan repayments. So, you might find that you can make your monthly repayments cheaper by moving to a mortgage which comes with a lower interest rate.
2. You Can Move From A Variable Rate To A Fixed One
There are two main types of mortgages – fixed rate and variable rates. Most people go with a mortgage that offers them a set period of having a fixed rate before it automatically moves to a variable rate. Once it is on the variable rate, the interest rate will reflect the national interest rate. However, on a fixed-rate mortgage, you won’t have to worry about the rate being charged to your mortgage changing at all. Some people prefer to be on fixed mortgages because they won’t ever get a surprise by the cost of their monthly repayments rocketing up if the national interest rate does. If you think that you might be better moving from your variable-rate mortgage onto a fixed one, then you can do that by refinancing. It might even be worth speaking to your current provider about this as they might be able to move you onto one of their different mortgage products.
3. You Could Take Some Equity Out Of The Property
Could you do with a bit of extra cash in your bank? Well, refinancing might be able to help you with that. If you refinance you can access the equity that has been building up in your home over time. This is all the money that you have already paid off your mortgage. You will be able to tap into this so that you can use it for other purposes, such as consolidating all your other debt, paying off bad credit cards, or paying for medical bills. You do need to remember that refinancing your home to tap into the equity will increase the size of your mortgage, though. But that could be worth it if it helps you get all your other debts under control.
4. It’s Possible To Move To A Shorter-Term Loan
A mortgage can lock you in for twenty, thirty, or even forty years. That’s a long time,for sure! But what if you decide that this house isn’t going to be your forever home and you will probably be moving a lot sooner than what you had in mind? Well, it could be worth trying to move onto a shorter-term mortgage so that you can pay off as much as you can as quickly as possible. First, though, it’s necessary to check a home loan calculator to see if you would be eligible for such a shorter mortgage. If you are able to move onto a mortgage with a shorter term, you could see your loan being slashed by up to fifteen years!
5. Refinancing Allows You To Remove Mortgage Insurance
There’s also a good chance that you took out some mortgage insurance when you first took out this loan for your home. However, some people are often mis-sold mortgage insurance when in fact they don’t really need it. If you think that you have been, refinancing your loan can help you get rid of it. It could actually be the only way you will be able to end the policy as the majority of insurances are tied to the specific mortgage that they are bought for and will only end once the loan does. Even if you do need the insurance, it might still be worth thinking about removing it if your home has increased in value significantly since you purchased it. That’s because you should have enough equity built up in the house to cover the rest of your mortgage if anything does happen to your main source of income, which will make the insurance redundant.
6. Get Some Extra Cash For Home Improvements
One other reason for you to refinance your home is if there are some home improvements that you need to fund. Changing your mortgage will allow you to tap into your home’s equity, which will be a pot of cash that you can tap into so that you have the cash to do all the necessary work and maintenance on your home. Try not to do this too often, though, as it could end up draining your equity.
There are so many different reasons why you might want to think about refinancing your home. Be sure to think through this carefully, though, as it really is a big decision.
