At times and in some situations, it makes more sense to re-mortgage than to stay with your current lender and ride the waves of constantly changing interest rates.
This article looks at five specific reasons to re-mortgage. But first, I want to say that the information in this article is not personal advice. Because your situation and finances are as unique as you are, you should seek professional, regulated, and specific advice before re-mortgaging to make sure that this is the best decision for you right now.
- If the introductory or fixed rate period on your mortgage is about to end, you can save a lot of money over the life of your loan if you refinance. You won't have to start paying your mortgage lender's variable interest rate, which is likely to be at least one percentage point higher than what you've been paying and could make your monthly bills a lot higher. Even a one percent increase will cost you thousands in extra interest payments over the life of your loan. That's money you could save for retirement, put toward your kids' college education, or use to pay off your mortgage faster, which brings me to my next point.
- Ignore point 2 and think about re-mortgaging to a cheaper lender and taking the discount if your monthly payments aren't quite what you want them to be.
- A lot of lenders want your business and will offer you good re-mortgage rates that will lower the amount you're already paying. If you can afford what you're paying now, why not skip the cut and keep paying the same amount to the new lender? This will help you pay off your mortgage faster. You can cut years or even months off the length of your loan. This means you won't have to pay interest for those years or months, which means you'll be a lot richer.
- To make your life easier, think about getting a fixed-rate mortgage so you don't have to worry about changes in the interest rate and can budget better.
- If you have built up equity in your home, you could think about refinancing up to the new value of your home and using the extra money to buy an investment property that you could either rent out to make a regular income or use to help the value of your home go up.
With this extra money, you could think about buying an overseas investment property in a country with an emerging real estate market. This will cost you less at first, give you and your family a vacation home, and save you money on expensive annual vacations. You could also rent it out when you're not using it to make money to pay for the property, and in the long run, the value of this property could go up a lot. You could choose to live in this house for the rest of your life or sell it for a nice lump sum that you can use to fund your retirement.
Think carefully about your options, and don't forget to look at the bigger picture! If you can make money from a re-mortgage, go for it, but get advice and help from an expert before making any investment decisions.
