Why Refinance A Mortgage?
Refinancing your property may involve a large expense. First, you have to learn the rules to follow so as not to make a costly mistake when refinancing your agricultural property or your estate. Refinancing is like buying your property again. You get a new mortgage to replace your current loan.
There are people who refinance to “take money” from their property, that is, to obtain a loan on the surplus-value of their property. Other people decide to extend the term of their mortgage so that their monthly payments “decrease.”
Refinancing To Get A Better Interest Rate
There are many reasons to refinance your property. For example, you can do it to get a better interest rate, reduce the term of your loan, or in the case of a divorce; to remove a former partner from the liability on the mortgage.
If your reasons for refinancing are to take money out of your mortgage or extend the term, then we do not recommend that you do so. In short, refinancing your property is like buying it again, but with a different loan.
Refinancing is a very good option when you intend to save money on your mortgage. It is in your best interest to refinance your property to save money on interest. But you should never refinance to extend the loan term. By stretching the loan, you also increase the amount to be paid in interest.
The two main factors that will allow you to save money are, get a loan with:
- • Lower interest rate
- • A shorter-term
For example, if your current mortgage has an interest rate of 8% and is for a term of 30 years, you could save a lot of money on interest by refinancing with an interest rate of 6% and for a term of 15 years.
Refinancing To Replace A Variable Interest Mortgage With A Fixed Interest One
Also, you can refinance to replace a variable interest mortgage with a fixed interest one. As the name implies, the variable interest rate changes over time. In the long run, you can end up with a much higher interest rate than what you started with.
When you have a variable interest rate, your monthly payments change constantly. With a fixed interest rate, your payment will always be the same for the entire duration of the loan.