When you remortgage your home, you get a new mortgage to replace the one you already have. This usually happens when the interest rates on the market drop below what you are paying. Most of the time, this is something that people with fixed-rate mortgages think about.
The Aids
Remortgaging your home can help you in a lot of ways. It is a good way to lower monthly payments, lower the overall cost of the home, and combine debts.
Pay less each month
With a remortgage, one of the things you can do is take the remaining balance and make the mortgage last longer. For example, you have been paying on a $120,000 mortgage for 15 years and have paid off $40,000. On the remaining $80,000, you can change the loan term back to 30 years. This will cut your monthly payments by a large amount.
Bring down the price of the house
The title is misleading; you won't actually save money on the cost of your home. You will lower the amount of money you pay for it, though. When you remortgage, you can keep the same balance you already have and just get a lower interest rate. You won't pay less on the principle, but you can save a lot of money on the interest.
Consolidate Outstanding Debts
Many times, you can combine loans with high interest rates, like a credit card, a car payment, or even a school loan (though most school loans have pretty good interest rates). This will cause you to pay more each month on your mortgage, but you will pay a lot less overall because you will no longer be paying off each loan separately. If done right, it can also mean less money is paid out in interest, but this doesn't happen very often.
Then, should you?
Before you remortgage, there are a few things you should think about. Remortgaging is a very important thing that shouldn't be treated lightly or carelessly.
Rates of interest change.
Many people will refinance at a lower interest rate, only to see that rate drop even more. Try to keep an eye on what is happening with interest rates and where they are going. At this point, it would be very helpful to talk to a professional because they will know what will happen next. It's nice to have your interest rate go down by 1%, but it's better to wait until it goes down by 2%.
It costs money to refinance.
When a house is refinanced, there is a cost that goes along with it. You might have to pay a fee to apply for a new loan, pay to have the house appraised again, or pay a fee to pay off your current mortgage early. Before you start this project, make sure you find out how much it will cost.
You may be in debt longer
When you combine all of your debts, you could be in debt for a longer time and pay more interest than you would otherwise. There are many loans that can't be paid back in 30 years. Most are set up to happen every 5 to 10 years. The consolidation of high-interest loans, which was already mentioned, will definitely lower your monthly payments, but it could also cost you more in interest rates. Think about it: if you were going to pay off $5,000 over three years, but now you have a 30-year mortgage, you will definitely pay a lot more in interest.
The Results of the Re-mortgage
I think it's safe to say that refinancing is a good idea. We can also say that it has some bad things about it. Doesn't everything, though? These are important choices that you need to think about for yourself. If you want to pay less each month, remortgaging can help. Remortgaging can also help you if you want to lower the total amount of interest you pay. But it can also make your total interest rate go up, and you might have to pay a lot of fees to make the remortgage happen. Before you decide to open the box, you have to think about all of its sides. Good luck, and enjoy your money!
