Home Refinance

Posted in General, January 30th, 2007 |

You have always wished to have a place to call your own. You have bought or intend buying property either to provide a safe shelter for you and your family or to earn rental income from it. But, the commitment in monetary terms need not put you off. You can compute the upfront costs and the total investment required. Then, you can fix your mortgage outflows.

If you are already a homeowner, chances are you would like to lower your monthly mortgage payments keeping up with the falling mortgage rates. Applying for home refinance is the best way to achieve this.

Mortgages are a significant source of revenue for the lenders and they are relatively safe. Moreover, offering attractive mortgage rates keeps the pressure on real estate prices low. Therefore, there is a boost to the real estate industry as seen in countries like the US, UK and Spain.

For the borrowers too, mortgage is an easy and systematic method of acquiring a valuable asset, namely their dream home. It is their best bet against inflation. Often, however, when mortgage rates fall as a result of increasing liquidity in the system, those who purchased high interest mortgages would like to move to lower rates. Home refinance is the chosen route for this transition.

Refinancing an existing loan has the following benefits:

Ø It lowers your monthly outflows on account of mortgage payments.

Ø It unifies or consolidates debt under one account making computation of mortgage dues or remaining period more realistic.

Ø It releases surplus cash that could be used for other personal commitments.

Getting home refinance is largely an effort at comparing equity in the property with the existing mortgage interest rates. Refinancing allows you to leverage the equity in your property to obtain more attractive quotes on rates. Besides the lower interest amounts, you would also save significant amounts in other costs if you bargain hard. The dollars saved in lower outflows mean you would have ready funds for emergency needs or better investment.

Most lenders allow the option of rolling over subject to differential costs for the roll over. Some important points with respect to home refinance are as follows:

Ø Refinancing brings future benefits while there are current costs. Therefore, the farther your time horizon, the larger the refinancing benefits. Similarly, shorter the remaining term of your existing loan, lower is the benefit accruing from refinancing.

Ø If there is significant equity in the property, you could avoid paying mortgage insurance.