Thursday, February 16, 2017, AM | Leave Comment
When taking a home loan, it’s absolutely necessary that you research the market thoroughly and only opt for a deal that suits your needs the best.
Still, since the mortgage market is becoming quite competitive, it makes sense to review your home loan from time to time. You might end up realizing that your loan no longer offers you everything you need.
If you think you can get a better deal out there, refinancing your loan might be the right move.
Listed below are 5 reasons why this is always a good idea.
High Interest Rate
One of the biggest reasons why you should consider refinancing your loan is the interest rate on your current deal.
No matter if you have a decent mortgage and a home you love, keeping an eye out for a better deal is always recommended.
For example, if you borrow $100,000 and have a 30-year fixed mortgage with a 6% rate, you will have to pay $600 every month. This means you will end up paying $116,000 in interest over the 30-year course.
Still, if you can get the same amount of money with a 4% rate, you only pay $72,000 in interest (a bit over $475 per month).
Falling behind with a retirement plan is an issue that many people face. If this is the case with you, refinancing your home loan might be a good idea. This way, you will be able to use the savings you make from refinancing to make contributions to your retirement plan.
And in case your employer offers the same contribution, your savings are going to double.
Also, since the money for your retirement plan is withdrawn from your paycheck before it gets taxed, your annual tax bill will be much lower.
There are plenty of scenarios where your income can drastically change and you might benefit from refinancing your current home loan.
In case of income decrease, you might be forced to get a new deal where your monthly fees are also going to be lower, which will make paying off your debt much easier.
Experts who offer mortgage solutions in Australia say that in such a case, getting a refi is the right move, since it will help you deal with your monthly payments without having to make any large cuts on your monthly expenses.
Large Credit Card Debts
Dealing with a credit card debt can be very difficult. And, in case you have a big credit card debt, refinancing your home loan is always a smart move.
Since mortgage rates now rarely go over 4%, and credit card interest rates tend to go double-digits, it makes much sense to go for a refi.
Not to mention that mortgage interest is tax-deductible which is not the case with credit card debts.
Still, if you decide to refinance your home loan, make sure you start using credit cards responsibly and prevent any future credit card debts.
Trading Your ARM
Most of the financial advisers out there say that getting adjustable-rate mortgages is never a good idea. This is the case because such deals put you in risk of losing your home in case you cannot adapt to the way mortgages adjust.
Still, individuals who are freelancing might find opting for such deals the only way they can get into the market.
If this is the case with you, refinancing your loan as soon as you get a chance is always a good move to make. This way, you will make sure there’s no more need to adapt to any future mortgage changes.
All in all, there are quite a few scenarios where refinancing your home loan is a great idea. Just make sure you research all the loan packages you can get and opt for the best deal available.
Dan Radak is a marketing professional with ten years of experience. He is a coauthor on several websites and regular contributor to BizzMark Blog. Currently, he is working with a number of companies in the field of digital marketing, closely collaborating with a couple of e-commerce companies.