There are many reasons to consider a home refinance.
Getting a better interest rate to lower monthly payments is still one of the leading reasons to refinance your home. Moreover, refinancing your home also means that you can access your home equity and put your money in long-term investments.
However, applying for a home refinance can be a complex and time-consuming process. If you’re not careful, you might end up making some financial mistakes. I have created a checklist of things that you should know before refinancing your home to help you become fully prepared in this endeavor.
1. Determine whether you can afford the cost of a home refinance.
Can you really afford the costs of a home refinance? Keep in mind that refinancing can be costly, and closing costs can be quite high. While ‘no closing cost’ loans may exist, they generally result in a considerably higher interest rate, and some fees may still be charged. Also, note that you may have to pay a large penalty if you break your mortgage term early.
It is highly important that you evaluate the costs first before deciding to refinance your home – this will help you determine whether or not you can really afford it.
2. Check your credit report.
Before talking to a lender, make sure to check your credit report first to ensure that there are no issues that would negatively affect the interest rate you will receive. If you find any issues or discrepancies in your credit report, be sure to clear them up before applying for a home refinance.
3. Compare rates and terms.
Normally, borrowers focus on the interest rate; after all, this is an important reason for refinancing. However, when making your decision, you should not neglect the other loan terms – particularly the duration of the loan. For instance, while a loan interest rate with a long payback period will lessen your monthly payments, the total cost of your home refinance will be considerably lesser if the loan has the shortest term that still allows you to consistently make your monthly payments.
Like many financial transactions, refinancing your home is complex. It requires due diligence on the part of homeowners who are considering it.
If you have any concerns about your home refinance, I can help you! As an experienced mortgage broker, I can answer your questions, provide guidance, and help you make the important decision as to whether a home refinance is right for you.
Will Bell Mortgage Broker is a mortgage and finance broker based in Melbourne specializing in residential home loans. Will is all about the average Australian understanding just enough of the broader economy to take action on your own personal economy. He is the host of the My Personal Economy Podcast which you can check out here.
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