The largest financial decision of your life will most likely be your mortgage. It is therefore of the utmost importance to make the right decision. Many first time home buyers do not receive the best interest rate possible. One potential solution is to look at whether refinancing your mortgage will result in a net saving to you.

Apathy is Your Enemy

Your loan may have been competitive at the time you took it out. This does not mean, however, that it is the best interest rate you can achieve now. By actively comparing deals on the marketplace you can investigate whether making a switch will benefit you. Banks and other financial institutions benefit greatly from this apathy, however you can opt to be active instead to reduce your mortgage burden.

Know Your Total Mortgage Liability

To effectively manage your mortgage, you need to know the total liability. One of the biggest problems people face is that they seldom know what they’ll ending up paying for the facility they’ve taken over the life of the loan. On a mortgage of $200,000, over at least 30 years, giving 7.25% every month, you will be paying $490,000 over the entire term. So, if your calculator is nearby, the total interest component will be $290,000. This is close to double the value of the mortgage itself.

Benefits of Refinancing By Investigating Alternative Home Loans

A simple reduction to a loan of 6.75% over 30 years would result in a reduction of $23,000 in interest, which is an 8% total interest rate liability deduction. Such a deduction will have a significant effect on your savings over the long term. Hence it can be very valuable to keep considering your options when it comes to dealing with your mortgage,

If Possible, Invest Extra Funds

One of the purposes of refinancing is to gain a lower interest rate for the mortgage. However if you are locked into one you can make extra savings by contributing extra money to your mortgage on a monthly basis. Let’s say you give $50 a month, you save an interest of at least $38,500 and the time taken off the mortgage term would be three years and four months. The rates are related to the 7.25% interest rate. If you were able to you are able to pay an extra $500 on a monthly basis, you would halve the time in which your mortgage is paid and halve the liability of your interest.

Centralize Your Personal Debt with Your Mortgage

An additional benefit for refinancing is the capacity to consolidate high interest unsecured debt into your mortgage. This can enable you to rapidly pay down your mortgage by using the savings made on the higher interest debt. The greater your credit card or personal loan debt, the greater the savings that you could make by consolidating them into your mortgage.

It is always necessary to ensure that by refinancing you are making a decision that is beneficial to you and that you understand how it will affect your finances.

If you would like to find out more about how mortgage refinancing could assist you to reduce your repayments and allow you to take back control of your debts. Then call us on 1300 308 497 for an obligation free consultation or fill out the short contact form.