Refinancing allows you to extend the term of your loan if you're having trouble making your payments. The downsides are that you'll pay your mortgage for longer and, over time, you'll pay more interest. However, a longer loan term can make your monthly payments more affordable and free up extra money. The most immediate benefit of refinancing is that it helps cash-strapped borrowers find space.
within your monthly budget. This could be advantageous if you expect your cost of living to rise (perhaps you are going to have a baby) or if your income has fallen (due to loss of work or reduced hours of work). The main disadvantage of refinancing is that it costs money. What you're doing is applying for a new mortgage to pay off your old one, so you'll have to pay most of the same closing costs you had when you first bought the home, including origination charges, title insurance, application fees, and closing charges.
Applying for a new loan requires time and effort. In addition, an adverse change in your credit rating or income could stop the process. Altus Wealth Pty Limited (ABN 55 649 956 212) is an authorized representative of Altus Financial Services Pty Ltd (ABN 24 637 026 825), Australian financial services licensee (AFSL no. Altus Financial Services Pty Ltd is not responsible for the advice, products and services provided by Altus Accounting.
Julie Azzi is a credit representative (CR No. If you're current on your current mortgage and have a respectable credit score, refinancing could be a valuable tool to help you achieve your financial goals. While refinancing a mortgage with a lower interest rate can save you money every month, be sure to consider the total cost of the loan. Like many financial transactions, mortgage refinancing is complex and requires due diligence on the part of homeowners considering doing so.
Refinancing a shorter-term mortgage could increase your monthly payments and make you no longer can afford them. Keep in mind that these are for situations where you refinance to lower the mortgage rate; in those situations, a refinancing with a cash outlay or a refinancing to extend your term and reduce your payments could still have advantages. While low mortgage interest rates can encourage many homeowners to restructure their finances, the decision to refinance your mortgage must be made based on your personal financial circumstances. Mortgage professionals often advise avoiding anything that affects your debts, income or credit during the weeks and even months when your refinancing request is being evaluated.
While many borrowers focus on the interest rate, it's important to set your objectives when refinancing to determine which mortgage product meets their needs. Finally, even if only temporary, refinancing your mortgage could have a negative impact on your credit rating, as the lender will conduct extensive research to assess your creditworthiness. Refinancing is a process that may seem intimidating to some people, but it doesn't have to be; in any case, it's easier than applying for the original mortgage with which you bought the home. Refinancing your 30-year mortgage would lower your monthly payment, but the long-term cost could eliminate any savings you hope to achieve.
In principle, there is no minimum amount of time you should wait before refinancing your conventional mortgage. When mortgage rates fall, borrowers sometimes fall prey to the temptation to pursue lower and lower rates, refinancing each time rates fall by a quarter or half a percentage point. Refinancing a mortgage usually costs between 3% and 6% of the total loan amount, but borrowers can find several ways to reduce costs (or include them in the loan). This is because refinancing a mortgage can take a long time, be expensive to close, and cause the lender to lower your credit rating.
In general, you'll need a credit score of at least 620 for any type of conventional mortgage refinancing.