What is mortgage refinancing/refinance?

Mortgage refinancing is in simple terms the process of switching your existing mortgage to a new one, usually with a different mortgage lender. To mortgage refinance you secure a new mortgage against your property and use the money from this to repay the previous existing mortgage, effectively transferring it. Changes in base mortgage rates and introductory offers can often mean that the mortgage rates available at present are lower than those agreed for you to refinance mortgage when you took it out, mortgage refinancing is the key to allowing you to take advantage of lower mortgage rates and better mortgage deals.

What are the reasons for mortgage refinancing?

There are so many reasons why a mortgage refinancing could benefit you financially, so we have just mentioned the most important ones here:

1. Mortgage refinancing to save money and eeduce outgoings

By refinancing mortgage with lower mortgage rates you could save a lot of money in the long term. When you consider the amount of money involved, and the time over which the interest is being charged on it, you can see that even a small reduction to the interest rate can result in significant savings.

If you are primarily looking to reduce your monthly outgoings by refinancing mortgage, then not only should you look for a lower rate, but you could also increase the term of the mortgage loan, as spreading the repayment over a greater period of time will reduce what you pay each month.

2. Mortgage refinancing to debt consolidation - All debts into one mortgage lender

Mortgage rates are some of the lowest available compared with other loans. By converting all your existing mortgage debts (such as credit card, personal loan, car loan etc) into one more easily manageable low interest mortgage refinancing you could save money and make life easier.

3. Mortgage refinancing to equity release - Releasing the positive home equity.

If your home has increased in value since you got your mortgage you may be experiencing positive home equity. This means that the current market value of your home is greater than its current mortgage value. Releasing this home equity can be the cheapest form of borrowing. There are also specific home equity release plans that provide an alternative income for your retirement.

4. Mortgage refinancing to a fixed-rate mortgage

If you plan to stay in your home for the long term and never want to worry about rising interest rates, replacing your current variable mortgage rate with a fixed-rate mortgage may be a smart move. With a mortgage rate that never changes, a fixed-rate loan gives you predictable payments throughout the loan term.

5. Mortgage refinancing to other reasons

There are also other unique reasons for mortgage refinancing that apply to specific lenders, such as mortgage refinancing to a current account to make your money work more efficiently or your don't satisfy with a current mortgage lender.

Some lenders offer mortgage refinancing packages with a particular reason in mind, such as home improvement packages and debt consolidation packages. Whatever the reason for mortgage refinancing there is no denying the massive savings you can make.

What are the benefits of mortgage refinancing?

1. Mortgage refinancing to get your home equity

Mortgage refinancing lets you tap your home equity to get the cash you need. It can be a great way to pay for home improvements, future investment, debt consolidation, or make a large purchase.

Mortgage refinancing replaces your current mortgage with a new mortgage for a higher balance. Your new mortgage pays off your old one, and you receive the remaining mortgage amount in cash. That cash comes out of the home equity you’ve built

Borrowing against the home equity you’ve built is generally cheaper than other types of financing, and it has tax advantages as well. Credit cards and personal loans usually have much higher rates than home loans, and the interest isn’t tax-deductible.

A house is the largest asset you may ever own. Likewise, your mortgage payment may be the largest expense you'll have in your monthly budget. Wouldn't it be great to use this asset to reduce your monthly payment and put extra cash in your pocket? When you refinance your mortgage, you can take advantage of the home equity and enable this to take place.

2. Mortgage refinancing to shorten the Length of Your Mortgage term

One of the advantages of mortgage refinancing is that you can shorten the term of your mortgage. Let's say, for example, that you originally had a 30-year mortgage and have been paying it for eight years. Thanks to mortgage refinancing, you can switch to a shorter term either 10, 15 or 20 years. This can save you thousands of dollars of interest. Also, if the mortgage rate is lower, but you maintain the same monthly payment, you will build up your home equity more quickly, because more of your payment will be going towards principal.

3. Mortgage refinancing to Save Money

A lower mortgage rate means lower mortgage payments. If mortgage rates have fallen since you took out your current mortgage, refinancing mortgage now may get you a lower mortgage rate. That means your monthly mortgage payments will go down, assuming the mortgage rate is all that changes.

Lower mortgage payments are great, but will mortgage refinancing actually save you money? That depends on the cost of taking out a new mortgage, and how much less you will be paying mortgage interest each month.

4. Mortgage refinancing to get lower payments with a longer term

Another way to reduce your monthly mortgage payments is to lengthen your mortgage term, which is the length of time you spend repaying it. With your mortgage payments spread out over a longer time period, each one will be smaller.

The drawback to this approach is that because you will repay the mortgage principal more slowly, you may end up paying more interest overall.

When is the best time for mortgage refinancing?

Many people flock to refinance mortgage while mortgage rates are low, particularly when mortgage rates are about two percentage points below their existing mortgage.

Other factors, like when to refinance mortgage, will depend on how long you plan to hold on to your home and whether you have to pay considerable fees to refinance mortgage. It also will depend on how far along you are in paying off your current mortgage. If you expect to sell your home relatively soon, you are not likely to recoup the costs you incurred to refinance mortgage. And if you are more than halfway through paying your current mortgage, you probably will gain little by refinancing mortgage.

However, if you are going to own your home for at least another five years, that is probably long enough to recoup any mortgage refinancing costs and realize real savings as a result of lowering your monthly payment. In fact, if it costs you nothing to refinance mortgage, you can gain even more. Many mortgage lenders will let you roll the costs of the refinancing mortgage into the new note and still reduce the amount of the monthly mortgage payment.

How to apply for a mortgage refinancing?

There are so many mortgage refinancing deals available from banks and non-banks, it can be difficult to choose the right one for you. You can use the enquiry form to apply and letting an expert get you the best deal.

Remember it is FREE to apply online through firstloans.com.au.