Refinance Benefits - Refinancing Could Save You Money
The most common reason most people refinance is to save money, but
many people refinance for various other reasons.
1. Refinancing to Lower Your Monthly Payment for an Existing Loan.
You can refinance your existing loan at a lower interest rate thus
reducing your monthly loan payments. With interest rates at their
lowest for years, you can find some excellent rates - sometimes far
much lower than what you're paying for your current loan or
mortgage. Refinancing your mortgage or loan when rates are down
could save you hundreds of pounds every month and thousands over the
life of your loan.
2. Refinancing to Consolidate Debts.
You may choose to refinance in order to consolidate debts and
replace high-interest loans with a low-rate loan. The loans being
consolidated may include higher purchase loans, student loans and
credit cards. You can clear all your existing credit cards, loans
and other debts and replace them all with one low cost cheaper
monthly payment. On a £12,000 loan some homeowners can save in
excess of £250 a month which is a considerable saving. A debt
consolidation loan is a smart solution for anyone who has many
outgoing monthly payments. A Refinance loan allows you to repay
existing loans from the proceeds of a new loan - the loan is usually
secured on property or your home.
3. Refinancing to Reduce the Term of the Loan.
Reducing the term of your loan can help you save money over the life
of the loan. For example, refinancing from a 7-year loan to a 3-year
loan might result in higher monthly payments, but the total of the
payments (or total cost of the loan) made during the life of the
loan can be reduced significantly. You'll also be able to build up
your equity faster. Use this free loan calculator (
http://www.commercial-mortgage-guide.org.uk/calculator/ ) to see how
the total cost of the loan reduces when the repayment period is
shortened. A refinance loan can save you thousands in interest
charges over the life of your loan.
4. Refinancing to Switch From Variable to Fixed Rates.
You can also refinance in order to switch from a variable rate loan
to a fixed rate loan. The main reason behind this type of refinance
is to obtain the stability and the security of a fixed loan. Fixed
loans are very popular when interest rates are low, whereas variable
rate loans tend to be more popular when rates are higher. When rates
are low, you can refinance to lock in low rates. When rates are
high, you may prefer the short term discounted variable rate loans
to obtain lower payments. A major benefit to refinance is the
ability to lock in a low interest rate for the duration of your
loan.
5. Refinancing to Switch from One Lender to Another.
Some lenders offer better mortgage or loan deals than others. They
may offer better customer support services, more flexible loan
repayment terms or just a service that is more suitable for your
needs. Refinancing your loan can allow you to drop your current
lender and switch to a new one with a better loan or mortgage
package.
You should carefully consider the savings you can make by
refinancing against the costs and penalties. Any homeowner can
refinance, but the point is to find a deal that will improve on your
existing mortgage or loan.
About the Author: © Copyright 2005, Bwalya Mwaba writes for the The
Commercial Mortgage Guide. Visit our website for mortgage related
news, articles, tools and more: http://www.commercial-mortgage-
guide.org.uk/. This article may be reprinted as long as all the
above links are active and clickable and this author box (byline) is
not edited.
