When Remortgage Is Essential for Your Home
by Ajeet Khurana
There are many reasons as to why people go in for remortgages. So before you decide to do so too, make sure you find out whether you really need one. A new mortgage could be your downfall or it could open up new doors for you and your family. Do not go ahead of yourself by filling out applications as soon as you see lower interest rates. It would make sense to ask yourself some questions before signing a deal.
- Is remortgaging your home necessary? Is it because you want to cash out and pay off some credit card debts or have your home remodeled? Is the burden of the monthly installments too much for you? Is the present rate lower than that of your existing loan? If you already have a stable loan and just want to cash out, maybe you should reconsider the benefits of having some extra money left over after paying your mortgage until you reach your retirement years.
- Do you have plans on staying at your home for a long time, or are you planning to move within the next few years? If there are no future plans of moving to another state, then refinancing could be a good idea about now, especially if you are being offered a lower interest rate. But if your job is a transferable one, you should desist from remortgaging your house for the moment.
- Do you think you will refinance within the next few years? If you have refinanced your home more than twice since you availed of it, you might want to stop now before you become dependant on loans. Your debt problems are not going to be eliminated by a remortgage plan. Also, consider the fact that mortgage interest rates are not static, a good deal this year could be the worst one the following year. If your financial troubles are not too intense, wait a little before you remortgage.
- Do you have steady employment? If you've been moving from one job to the next in the last couple of months, you might want to take a deep breath first. Do not commit to a new mortgage loan if you are struggling to survive as it is.
- What are the interest rates? (Your current rate as well as the prevailing rate) What are the terms of the loans you have and the one you would like to get? Ideally, you should shift to a new plan only if you are convinced that you will be able to save a lot. If the new term is 30 years, while your current one is only 15 years -- you will end up paying more. Evaluate the deal depending on both, the long term and the short term advantages.
- What is amount of equity you already have built up? When one is thinking about remortgage, one must have a clear understanding about home equity. Equity is the actually the difference of how much your house is worth now and how much you still owe on your mortgage.
Do not plunge into the unknown just because everybody else is doing it. You may be confident about your financial capability. But the future is uncertain. Make sure you give serious thought to everything.
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