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 §”2,000 loan some homeowners
can save in excess of §‘50 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
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
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