When Is It Best to Refinance Your Home Mortgage?

Refinancing a home loan means you trade in your pre-existing mortgage on your property for a new one based on its current value. In doing so, it gives you access to better equity in order to improve your finances. The main reason to refinance is to lower the interest rate on your existing loan, so it can save you money. It is also an alternative way of reducing monthly expenses for the time the home loan is outstanding. 

Another reason why homeowners refinance their mortgage loans is to consolidate their debt. However, this does not bring immediate financial discipline. If you are looking to fix your debt snag with this method, you need to be sure that once refinancing relieves the burden of debt payments on cash flow, you are not enticed to spend that money. People who generate large debts from credit cards and other expenses have a higher chance of falling back into that entanglement. 

When applying for home refinancing, your property needs to first be revalued and your credit history will also be taken into consideration. Only when these are looked through, will your application be considered and hopefully approved. It is advisable to apply for refinance in less than 5 years of the loan payments, as on a home mortgage, you may have already paid a material amount of interest so payments thereafter will have more principal application.  

Be aware that the existing, new bank or other lender you will be doing business with will be treating refinancing as a new loan, meaning all documents and procedures required need to be done from the beginning again. If you have an irregularity or loophole in your current loan repayment, you may not be able to make the switch. Make sure you consult with your financial advisors on the best possible way forward with your mortgage, weighing the pros and cons of refinancing.