Tuesday, July 14, 2009

Refinance Guide

If your home loan is more than 5 years old, it is likely that you are servicing your loan at a higher interest rate than what is on offer by financial institutions today. Many borrowers are complacent with their current loan or they wait till their lock-in period expires before thinking about refinancing.

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Refinance Guide

However, with the many competitive home loans products on offer especially ones that will cover any refinancing costs, exploring refinancing is a worthwhile investment at any point in the life of your home loan, to lower monthly repayments and save you money in the long run as well as give you the flexibility in managing your cash flow .

Reason to Refinance
The primary reason for refinancing is to reduce your current interest rate, monthly repayments and/or loan tenure . You may want to lower monthly repayments to set aside money for your use or to save in an investment product every month. If you think interest rates may rise, you may want to refinance to a fixed rate loan. Another reason for refinancing, particularly if your home has increased substantially in value, is to tap into your home equity for additional funds for emergency and other ventures.

An important and often overlooked reason for considering refinancing is to consolidate your debts and deposits for better cash flow management . Refinancing can be one of your first steps towards spring cleaning your financial state of affairs. If you are paying high credit card or overdraft interest you may want to clear some of this debt to save you money in the long run. Home loan products have become very competitive in recent years offering interest calculations on a daily rather than monthly basis and additional flexibilities for prepayments and redraws save you on the total interest you pay on your current loans.

Shop Around
Whatever your reason, it pays to shop around for the best loan product to refinance your current home loan. Factors to look out for are zero moving costs or zero refinancing costs packages. Also look for a flexible product which allows you to make additional prepayments and redraw any repayments throughout the life of the loan. Some financial institutions offer a line of credit tied to your home loan where repayments are interest only. If lowering monthly repayments is your aim for refinancing, look out for products that offer a longer loan tenure thus by stretching out the repayments, monthly installments are lower. This is an attractive option if you intend to stay in your home for a long length of time.

In order to make the best decision for you and your family, it is important to be aware of your short-term and long-term financial goals pertaining to your financial situation and your home . Draw out your current situation, your immediate financial needs such as to consolidate your debt or to renovate your home and your future financial needs such as to send your kids to college. Also match this with a long term savings and insurance plan to ensure that you have a nest egg when you retire and no longer earn a constant stream of income. The best decisions are based on the most thorough information.

Pick A Refinance Loan
The home loan market is becoming more and more competitive as financial institutions look for new ways to do business and more efficient ways to get customers. This makes it better for you as the products available for you to choose from are cheaper and more versatile than before. However, it can also be confusing to a consumer which home loan to pick.

An experienced mortgage sales person or mortgage consultant would be able to give you good information on the many products in the market which is suitable for you. When speaking to a mortgage consultant, enquire about trends in interest rates currently, in the short-term and in the longer term. Also enquire about the features of home loan products which are suitable for your unique financial situation. Try and get an independent view of the home loans available from different financial institutions including the smaller financial institutions which may offer competitive products as they may be more eager for your business. Don’t forget to get a good understanding of any hidden costs in any home loan product.

The process of refinancing is not as difficult or bothersome as you think, particularly if you have a good mortgage consultant. Considering refinancing could be a worthwhile effort to save you your hard-earned money and give you the financial independence you seek .


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