3 questions to ask yourself before refinancing your loan
Refinancing your loan has a number of benefits, but just like any major financial decision, you have to ensure that you are doing enough research and asking yourself the right questions. As mortgage brokers, we want to make sure that you get the right loan for the right reasons.
To get you started on your journey, here are three questions you need to ask yourself to ensure that refinancing is the
right choice for you.
How much am I going to save?
If you are refinancing after a long period of repayments, you might find that you can improve your home loan interest rate. All those consistent, punctual payments to your lender mean that your credit rating will have improved. This reduces your risk, and your mortgage lender may be more willing to cut you a deal with your new refinanced loan.
This will also help you learn how much you will be able to readjust your budget as a result of your refinancing.
How am I going to use the capital?
There are plenty of ways to use the equity you have unlocked from your home. If you want to re-invest the capital back into property, you have two choices, mostly dependent on the amount of capital you received: either use that new chunk of change as a deposit on a second investment, or use the cash to update your current home or portfolio.
Either way, we would advise to make that capital work for you.
How am I planning to manage the new repayments?
Your long term financial plans may need to change due to the shift in the lifetime of your new loan.
Sometimes, refinancing is necessary because your circumstances change and you can no longer afford your
repayments. Even if you have refinanced just to access the equity in your current home, you have to double and triple
check to ensure that your household budget can handle your new repayments.
Furthermore, your long term financial plans may change due to the shift in the lifetime of your new loan. Make sure you consider the long term as well before committing to a refinancing.
Completing the journey
Are you happy with your answers to these questions? If you think that refinancing is right for you, it’s time to complete your journey and bring your findings to us. We’ll go even further in depth and see if we reckon that refinancing is the solution to your financial goals.