Mortgage Refinance Information
Most people will refinance their mortgages if they feel they are paying to high an interest rate. However, sometimes the costs of refinancing can outweigh the savings that you receive. This article will explain how you can calculate of it is beneficial to refinance and what information you should have at hand when you are making these decisions.
Is it Beneficial for you to Refinance your Mortgage
If you are considering refinancing your mortgage it is important to consider if it is actually going to save you money. Refinancing usually comes with a variety of additional costs and as a result it is important to know exactly how much it is going to cost you. When refinancing a loan you must consider:
- How much you are going to save through the interest. The main reason people will refinance their mortgages will be that the interest rates that are offered with your current mortgage are high compared to others available. The first step in determining whether it will be beneficial to refinance is to calculate how much money you will save on the interest.
- How much will you save on fees. Different loans may charge different amounts in fees. It is important to check whether you will be saving money on fees with your new loan and add this to the total savings.
- Are their additional fees. Once you have figured out how much you have saved it is then important to figure out how much refinancing will cost you. When you refinance a loan there can be many additional costs and these costs can often outweigh the benefits of refinancing. When you are considering refinancing be sure to make sure that you are aware of the closing costs of your current loan, the costs that are associated with applying for a new loan and the extra fees on the new loan.
- Will you save money. After you have calculated all the savings associated with your new mortgage and all the costs of switching loans you can then make an informed decision about how much you will actually save.
What Information do you have to Provide to Refinance your Mortgage
When you are considering refinancing your mortgage you will have to provide information so that the provider or refinance calculator can give you the best information. The information you should have at hand is:
- Details of your current mortgage. When refinancing it is important to have all the information of your current mortgage. You should have details like how much you owe, what your repayments are, the interest rate, fees and special features of the loan.
- Details of your proposed mortgage. You should always have an idea of the loan that you may want to switch to. This may be a fixed interest rate loan or another variable rate loan but with a different provider. This will help you narrow down your choices when it comes time to compare refinance loans.
Refinancing your mortgage is a very big decision to make. When refinancing you are usually making a decision with about hundreds of thousands of dollars so it shouldn’t be made lightly. First, you must decide whether it is beneficial to refinance. Weight up the costs associated with refinancing against the savings you will receive. Furthermore, to make an informed choice about refinancing have all the information about your mortgage available so that you can make the process as easy and as accurate as you can. If you would like to know more about mortgage finance information please contact us.
Mortgage Refinancing Hits All Time High
According to the Australian Financial Group (AFG) a record number of home buyers are refinancing their home loans. To be precise, the percentage of mortgage refinance taking place as compared to those taking out home loans to purchase a home in May 2010, was 38 percent, up from 36.6 percent in April.
The reason for the increase is unclear but a major component could be the present pause taking place in interest rate rises that is giving borrowers time to reflect a little on their future. Following the record interest rate lows of 2009, as fear of a recession became real for one quarter, owing to the uncertainty of which way the Global Financial Crisis (GFC) might affect Australia, we saw a gradual increase in the cash rate as the Reserve Bank brought rates back to a more realistic level.
As a result of the action taken by the Reserve Bank, inflation has been held in check as the economy regained momentum once again. During this whole process house prices continued to dramatically increase, that is until recently where we are now seeing prices either stabilize or grow at a much slower rate.
While interest rates were held at their historic low levels many investors and home buyers bought into the market.
A lot of these people chose to finance their purchases with variable interest rate home loans as they believed that if the GFC worsened rates would go even lower as they had in the USA , Britain and Europe. It was forecast by many that the GFC would adversely affect the Australian economy much more than it did.
As government measures to combat the looming recession started to take effect it became clear that the economy was actually growing again and the Reserve Bank went to work to bring interest rates back to what they considered to be ‘normal’. This caught many by surprise and the increasing rates started to bite. Mortgage refinance started to become a real solution and the number of fixed interest rate loans was beginning to look attractive.
Before the interest rate increases started to cause any real economic pain, the percentage of home buyers buying into the market to upgrade their homes was running at 18 percent, since the series of rate increases this has fallen to 15.4 percent AFG reported. Another indicator was that the number of first home buyers only represented 9.9 percent of the market in May, although this has to be read in the context of the First Home Owners Grant Bonus incentive being withdrawn by the Federal Government. Property investors have been unperturbed by all this volatility however as they have grown their share of the home loan market to 36.7 percent.
Mortgage refinance has allowed many home buyers to renegotiate a better deal in an environment of further interest rate increases. Some home loan financial experts are forecasting another spate of increases of at least 1 percent before the end of 2010 and if this was to be borne out the refinancing of many other mortgages would still be a valid move. Nobody is forecasting a drop in interest rates.
Most major money lenders are only too happy to talk to you regarding your mortgage refinancing. All you have to do is ask. Many home buyers who have asked have received an interest rate decrease of between one and two percent Choice magazine has reported. If your lender is being uncooperative in showing any willingness to allow you to carry out mortgage refinance there are many other lenders out there who will.
If the Reserve Bank was to raise the cash rate by 25 basis points in the near future as many are starting to believe they may, it would add $65 to a $400,000 mortgage bill every month. A good enough reason to take mortgage refinancing seriously.
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