Your mortgage is likely to be the biggest financial commitment in your life. It’s something that most people will be eager to pay off. Of course, it’s not easy to pay your mortgage off early, but refinancing can help.
The question is when is best to refinance? Here are some tips to help you decide.
When You Have To
Owning your own home is more than just financial security, it helps to build your nest egg for retirement. But, if you’re struggling with debt or the mortgage payments you’ll need to consider whether it’s time to refinance your mortgage.
This can free some of the equity in your house, allow you to consolidate other loans, and make it easier for you going forward.
Providing you do this with a plan and a budget, that you’ll stick to, refinancing makes sense. In short, if you need to do it then now is the right time.
Of course, you need to extend your payment term in order to reduce the payments, especially if you’re borrowing more.
The lower the interest rate the less you’ll have to pay back on the lump sum you borrowed for your house. This can make life easier as the payments are smaller. Or, you can take the opportunity to overpay and reduce the term of your loan.
If you’re in a strong financial position then you should consider refinancing your mortgage when the interest rates are as low as they are likely to be.
Finding the lowest home loan rates can save you a small fortune!
If you’re fortunate enough to have received a pay rise and can survive without the additional money this can be a great time to overpay your mortgage. Unfortunately, not all mortgages offer this potential. Even if they do, you may find it simpler to refinance and increase the level of your payments.
This will allow you to decrease the length of your mortgage, helping you to own the house sooner. It will also give you more time to save for retirement.
Of course, choosing to refinance to reduce the time it will take to pay your mortgage should be done in conjunction with the lowest possible interest rates.
Another time to refinance your mortgage is when you’re looking to undertake an exciting new adventure, such as starting a business. You’ll need to consider carefully first as this may place additional strain on your finances. But, refinancing can offer a way to keep your home separate from your business and protect your assets if things go wrong.
The key to successfully refinancing is research. Know the interest rate and what you should be able to get, that will help to ensure you get the best possible deal. Of course, you’ll be lucky to get a deal that offers you the current official rate of interest. But, if your credit is good you should be very close to it, you may be surprised at how much difference this can make over the term of the mortgage.