Paying bills is one of those monthly chores that no one likes to do. Not only is it a tedious business but also your hard earned always seems to be flying out of your pocket at an alarming rate. There are ways to cut down on your monthly bills, like using energy-intensive appliances when power costs are low, but this article concerns the possibility of saving by refinancing your home loan.
Refinancing has attracted something of a poor reputation over the last few years. There are a great may predatory lenders operating today who lure the unsuspecting with low application fees and a great introductory rates, only to sting them a year down the road with fees and rates that will make your eyes water.
This is certainly reason to be careful, but not to put the idea of refinancing out of your consideration. If done properly, refinancing can give you enough financial room to breathe to get through rough patches or free up a little bit extra for your savings.
Simply stated refinancing a home loan is a way to revisit the term, payment schedule and interest rates of your mortgage. In this way you can secure a lower interest rate or arrange to make lower payments every month. Alternatively, you can pay off your loan faster by making larger repayments. What you are able to do will depend largely on the fine print in your mortgage and the rules of the institution holding your loan. You may even be able to release some of the equity in your home to spend on emergencies or renovation.
Aside from the risks of predatory lenders, be aware that refinancing your home loan is not a magic bullet to your financial problems. Refinancing may appear a godsend, and it will certainly be sold to you as one, but in many cases all you will be doing is pushing your debt into the future and paying more to service the loan in the long term than you would otherwise.
A home loan is by its very nature a long term and heavy financial burden, and refinancing your loan may be a way to lessen the load somewhat. At the very least, it is an option worth investigating.
This guest post is brought to you by Bank West.