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| If your home loan is more than 5 years
old, it is likely that you are servicing your loan at a higher interest rate
than what is on offer by
financial institutions today.
Many borrowers are complacent with their current loan or they wait till their
lock-in period expires before thinking about refinancing. However, with the
many competitive home loans products on offer especially ones that will cover
any refinancing costs, exploring refinancing is a worthwhile investment at any
point in the life of your home loan, to lower monthly repayments and save you
money in the long run as well as give you the flexibility in managing your cash
flow. |
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| Reasons
to Refinance |
The primary reason for
refinancing is to reduce your current interest rate, monthly repayments and/or
loan tenure. You may want to lower monthly repayments to set aside money for
your use or to save in an investment product every month. If you think interest
rates may rise, you may want to refinance to a fixed rate loan. Another reason
for refinancing, particularly if your home has increased substantially in
value, is to tap into your home equity for additional funds for emergency and
other ventures.
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| An important and often overlooked reason
for considering refinancing is to consolidate your debts and deposits for
better cash flow management. Refinancing can be one of your first steps towards
spring cleaning your financial state of affairs. If you are paying high credit
card or overdraft interest you may want to clear some of this debt to save you
money in the long run.
Home loan products have
become very competitive in recent years offering interest calculations on a
daily rather than monthly basis and additional flexibilities for prepayments
and redraws save you on the total interest you pay on your current loans. |
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| Shop
around |
Whatever your reason, it pays to
shop around for the best loan product to
refinance your current home loan. Factors to look out for are
zero moving costs or
zero refinancing costs packages. Also look for a flexible product which allows
you to make additional prepayments and redraw any repayments throughout the
life of the loan. Some financial institutions offer a line of credit tied to
your home loan where repayments are interest only. If lowering monthly
repayments is your aim for refinancing, look out for products that offer a
longer loan tenure thus by stretching out the repayments, monthly installments
are lower. This is an attractive option if you intend to stay in your home for
a long length of time.
In order to make the best decision for you and your family, it is important to
be aware of your short-term and long-term financial goals pertaining to your
financial situation and your home. Draw out your current situation, your
immediate financial needs such as to consolidate your debt or to renovate your
home and your future financial needs such as to send your kids to college. Also
match this with a long term savings and insurance plan to ensure that you have
a nest egg when you retire and no longer earn a constant stream of income. The
best decisions are based on the most thorough information. |
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| Pick
a refinance loan |
The home loan market is becoming more and
more competitive as financial institutions look for new ways to do business and
more efficient ways to get customers. This makes it better for you as the
products available for you to choose from are cheaper and more versatile than
before. However, it can also be confusing to a consumer
which home loan to pick.
An experienced mortgage sales person or mortgage consultant would be able to
give you good information on the many products in the market which is suitable
for you. When speaking to a mortgage consultant, enquire about trends in
interest rates currently, in the short-term and in the longer term. Also
enquire about the features of
home loan products which
are suitable for your unique financial situation. Try and get an independent
view of the home loans available from different financial institutions
including the smaller financial institutions which may offer competitive
products as they may be more eager for your business. Don’t forget to get a
good understanding of any hidden costs in any home loan product.
The process of refinancing is not as difficult or bothersome as you think,
particularly if you have a good mortgage consultant. Considering refinancing
could be a worthwhile effort to save you your hard-earned money and give you
the financial independence you seek.
Use our Refinance calculators
here. |
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