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Tuesday, 1 April 2014

How mortgage refinancing works and what are the reasons

A home mortgage is a long term commitment. For most people it is a 30-year commitment. In this amount of time many things can change. Many people will outgrow their home and sell their house. Sometimes people also outgrow their mortgage. In this instance, mortgage refinancing can be useful.
Benefits of refinancing: There are many reasons why people decide to refinance their home. As you pay off your mortgage, the principle reduces while the value of your property increases. The difference between these two figures is known as equity. When you refinance your home, the bank may give you a home equity loan. You can use this money to improve or enlarge your home, pay for tuition, or even take a holiday.
Sometimes, as a mortgage decreases, home owners decide to refinance for a lower rate in order to lower their monthly repayments. This is a good option if you are struggling with difficult financial times or are just looking to free up cash flow for other projects.
Refinancing your home also gives you a chance to renegotiate your mortgage terms with your bank or lender. This means that you may be able to achieve a lower interest rate and also lessen the fees and charges which are attached to your home loan.
The Refinancing Process: When you refinance your mortgage, you can stay with your current lender or shop around for a new one. MortgagePRO will do the shopping for you, providing peace of mind and convenience. The refinancing process is similar to the one when
you originally bought your house and applied for a mortgage.
The bank or lender will most likely go ahead with the usual checks, such as employment and identity checks. They will also require a valuation of your home, which they will arrange. Once this has all been finalized, your old mortgage will be discharged and your new mortgage will come into effect.
There are usually some fees attached to a refinance loan. These can include a loan establishment fee, a valuation fee, and the possibility of ongoing fees. There is a chance that there may be a fee from your lender for the early discharge of your loan.
Search for a mortgage: Finding out as much mortgage information as possible before you sign up for any loan is a good idea. Being aware of not only the interest rate, but the fees and charges attached to the loan product, is essential. Reading the small print now can save a lot of heartache later.