If you currently have a mortgage you might be considering refinancing to a different product. These days, there are hundreds of home loan products available from many different lenders, so you are not stuck with one product for life.

There must be an overriding reason to refinance your home. Otherwise you might be better off sticking to your current product. One of the more obvious reasons is to save money, but there can be other reasons as well. This is because modern day mortgage products often come with features and benefits, such as drawdown facilities and overpayments, which some borrowers find useful.

Saving Money

Probably the most common reason for refinancing is to save money. This can be done by switching to a product that has a lower interest rate or a shorter term. Both of these benefits will help you pay less interest over the life of your home loan and therefore save money.

Switching to a product with a lower interest rate will reduce your monthly payments while keeping the term of the loan the same. Over the life of the loan, you will pay less interest to your lender while paying off the loan in the same amount of time as your previous mortgage product.

You can also save money by switching to a product that has a shorter term but the same interest rate. Because you will end up paying off your home in a shorter time, you will pay less interest over the life of the loan.

Consolidating Debt

You might also refinance to consolidate debt. This means paying off other debts – such as credit cards and personal loans – by borrowing more on your mortgage. This is usually done to pay off more expensive debt with cheaper debt. In the short term, you can pay less interest, but if you do not increase the amount of money you pay off your home loan each month, you could end up paying more interest over the entire term.

Equity Release

If you have some equity in your home you might want to release some of it. By refinancing you can release equity for almost any reason. People often release equity to pay for large purchases such as cars, extensions on their homes, buying an investment property, or sending their children to university.

More Flexibility

These days home loans offer a number of facilities that offer borrowers flexibility. This includes drawdown facilities, the ability to overpay and underpay, and the ability to fix interest rates on part of the loan while leaving the remainder under a variable rate.

If your current home loan does not offer the flexibility you want, you might consider refinancing to a different product – perhaps even with your current lender.
Before You Refinance

If you are considering refinancing your mortgage, your first port of call should be your local mortgage broker. An independent mortgage broker will have access to a number of different lenders which offer a wide selection of products.

By consulting with your mortgage broker you can save a lot of time and hassle when compared to shopping around yourself.

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Category: Finances
Keywords: mortgage broker, mortgage brokers