Home refinancing is one of the most effective ways to release cash, reduce monthly expenditure and improve your financial position. This cash solution is available to home owners.
Choosing home refinancing can also reduce bond repayments substantially.
How does home refinancing work?
As a borrower, you secure a new mortgage for your property based upon its current value. This gives you access to equity. You can get a loan against the equity on your home, instead of having to apply for a personal loan from a traditional lending institution.
Equity is the difference in value between what you owe on an asset and the value of that asset.
Home refinancing is a line of credit, so you’ll pay interest on it. There are associated risks, so you need to keep these risks in mind when refinancing.
Common reasons for home refinancing:
- It reduces monthly costs.
- Equity release- you can get the cash you need, at an interest rate that you can afford.
- You can use the loan to consolidate debt.
Home refinancing tips:
Choose a short loan length. You want to make sure that you repay the loan as soon as possible.
Home refinancing should be done through a reputable company that can offer you low interest rates. Make sure that you do thorough research about the lending institution of your choice.
In most cases, it makes the most sense to refinance with the original lender.
Before applying for home refinancing, make sure that you check your credit rating. Lenders will take this into account during your application process.
Risks associated with home refinancing:
- There are possible penalties to pay.
- The fees associated with paying for an attorney can be quite high.
- If you fail to repay the loan you face the possibility of losing your home.