Refinancing is basically a change in a debt obligation. The terms and conditions of the outstanding debt obligation are abrogated by a new set of stipulations.
Home loans are major debt obligations that often lead consumers to refinance. There are many reasons why individuals choose to refinance their home loans, but almost all of them have to do with budgeting. That is, one has to decide whether existing mortgage repayments are making it difficult to make ends meet, especially with the occasional – and unexpected – interest rate rises.
Refinancing Costs
Try not to be alarmed by the expenses associated with refinancing, although they might seem overwhelming at first. Think positive. Consider it an invested short-term loss for long-term gain.
Costs related to refinancing your home loan include discharge fees, stamp duty, mortgage insurance and application fees. This could set you back one thousand dollars, or in some cases more than three thousand dollars depending on your existing home loan.
Why you Should Refinance your Home Loan
Surely the ends justify the means. The benefits of refinancing your home loan will generally suit your long-term financial interests. Thus, it is best to refinance your home loan at a time when you need to financially obtain a variety of important needs at once. For example, you might need a new car exactly at the same time you need to renovate your home, as well as pay off a number of relatively small debts.
Make sure you have some definite objectives in place. Know the exact reasons why you need to refinance. Try not to refinance outside the realms of necessity, for that can be a significant source of refinancing problems, especially if you don’t have clear refinancing goals. If in doubt, always seek advice from your financial advisor.
Choosing to Refinance your Home Loan
Refinancing your home loan can be a significant life decision, almost on the same level as taking out a mortgage. That is why the same amount of care and serious thought about refinancing your home loan should be applied. It is certainly not a frivolous exercise!
If you believe that short-term costs associated with refinancing your home loan exceed its long-term benefits, then it is better to remain committed to your existing debt obligation. Why make things financially harder for yourself than what they are already? In the same way, if refinancing your home loan will drastically improve your lifestyle, then give it a go. Just remember that it doesn’t matter how comfortable you’d feel about refinancing your home loan, it is always better to see your financial advisor first.
