What to Look for While Refinancing Mortgage Loan

It is a great way to reduce the number of interest borrowers pay for their monthly payments. There are various reasons why an individual may want to refinance its mortgage, but most commonly, it is when home loan interest rates get reduced.

However, when it comes to refinancing a mortgage loan, try to keep the following five points in mind:

Borrower’s Interest Rate: Interest rates are constantly changing, which is why it’s so important to keep up with them. If the borrower doesn’t know about these changes and end up getting stuck in a contract that will force him into paying more than he should be over his lifetime of repayment, then it can cost him extra repayments over the life of the mortgage.

The best way to avoid this situation when refinancing is by consulting a home loan broker to get informed about the interest rates of multiple lenders in the market.

Cost of Refinancing: It is not free to Refinance a mortgage loan- Depending on the type of loan, there can be a number of fees associated with it; sometimes, they are costly enough to outweigh any benefits that might come from refinancing a home.

If the borrower wants to assess the cost while refinancing, one way to do this is to use an online Refinancing Home Loan Calculator to compare the interest rate. This calculator can estimate how much money a borrower will save while also considering all costs associated with the new deal.

Credit Ratings: A borrower’s credit score is a key factor while refinancing a mortgage. If the borrowers’ credit score is not so good, they might find it working against their efforts to refinance. Apart from these, rejected applications for refinancing can also adversely affect a borrower’s credit score.

As a first step, it is essential to determine if the borrower is eligible for a home loan- Mr Rohit Khatak, a leading Home Loan broker at Hunters Hill, can help the borrower qualify for the loan.

Consolidate Debt: Debt consolidation is a great tool for those with large amounts of debt, and it could be the one reason for borrowers to consider home loan refinancing. Debt consolidation can reduce the total amount of interest a borrower has to pay for his loans. If a borrower is paying high rates on multiple credit cards, refinancing and consolidating these debts with an affordable mortgage could help ease the burden of managing those payments.

Debt-to-Income Ratio: Although the prospect of getting home refinanced is exciting, it might not be possible due to the borrower’s current debt-to-income ratio. The monthly mortgage payment should not exceed 30 per cent of their income, and their debt-to-income ratio should not be higher than 35 per cent. Therefore, it doesn’t matter whether their application is approved for refinancing; they should always keep their debts minimum.

Conclusion: To sum up, there are lots of things to consider when refinancing a home. It is important that the person must start planning for it well before the process takes place because ample preparation and forethought can go a long way in making this task easier, faster, and complete success!

Your Finance Adviser is a finance advising company based in Australia and we are proficient at offering the best mortgage refinance advice to our clients. If you need help with your home loan, contact us today!