Consider Refinancing

Author: Brad Slade

Article:Refinancing has become a valid option for many individuals withhigh interest rates on their mortgage. This is essentially a replacement loan, with a different lender and(hopefully) a lower interest rate.

So why would you choose to do this?

- You may be able to take advantage of lower interest rates.

- You may also be able to extend the repayment period of yourmortgage. While you will end up paying more in interest chargesfor this, this will reduce your monthly outgoings.

- You may be able to switch from a variable rate to a fixed ratemortgage, giving you greater security in the future frompotential rate increases.

- You may also be able to increase the amount of your mortgage,to pay off other, higher interest rate liabilities such ascredit card debt, cell phone debt and personal loan debt. Thiswill enable you to save money on interest rate charges

Why would you avoid refinance?

If you decide to borrow more than your existing mortgage, youneed to be wary of your budget. If you default on your paymentsyou run the risk of losing your house.

If you do not calculate the costs involved with this process correctly, you could end up paying more in interest charges.

Thoroughly review the contract of your existing loan, an earlypay out could involve a penalty that would negate the benefits of doing a refinance.

What will it cost me?

It does carry some costs that you need to be made aware.

Valuation Fee - This is the fee for a professional appraisal ofthe value of your house. Credit Report - An assessment of yourcredit health Escrow - Fee for money transferred by a thirdparty. Lender Fees - Any other fees that are incurred by using aparticular lender

Am I eligible? Applying for mortgage refinance is just likeapplying for another loan.

There is a set criteria foracceptance. Every missed mortgage payment will count against youin the application, either resulting in a greater interest rateor a refused application.

Should I choose this process? You will need to assess yourcurrent mortgage and the changeover costs and savings toascertain whether it will be of benefit to you. There arespecific calculators that can help you determine thenet gain. The best one that I have found is here calcbuilder.comAs a rule of thumb many lenders advocate that a 1% gap betweenyour current interest rate and the new rate makes ita worthwhile option. Always make sure to speak to a financialprofessional before deciding to refinance your mortgage.

About the author:More information of mortgage athttp://members.optusnet.com.au/~mortgagearticles/

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