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Nook - 6 Reasons to Refinance Your Mortgage

6 Great Reasons to Refinance Your Housing Loan

6 Great Reasons to Refinance Your Housing Loan

Mia E – July 12, 2022

Wondering how to refinance your housing loan? Not sure if refinancing your mortgage is a good option for you or not?

In this article we will explain what refinancing a housing loan means, and the reasons to refinance your housing loan explaining why you might want to do it.

What is Refinancing a Housing Loan?

Refinancing is the process of getting a new housing loan for an existing property. This could be because you want to lower your monthly payments, or because you need more money for renovations or repairs.

If you're thinking about refinancing your home loan, it's important to understand why this might be beneficial for you, what options are available, and whether it's right for your current situation.

Here’s 6 Great Reasons to Refinance Your Housing Loan

1. To Lower Your Monthly Repayments

You can refinance your existing housing loan to have a lower monthly repayment amount. By reducing the length of your loan term or lowering the interest rate, you'll be able to pay less each month while still being able to afford other expenses without feeling pinched!

The sooner you switch your existing housing loan lender, the sooner you can start enjoying your lower monthly repayments.

Refinancing results in a home loan with a new bank and gets rid of the interest rate that is higher than prevailing rates today. So, if you have a chance to refinance your housing loan, do it.

2. To Get a Better Rate From Your Improved Credit Score

After you've done all the hard work of getting your credit score up, moving to a better rate can be an easy way to help you save money.

For example, if you have a housing loan with a fixed interest rate, and your credit score has improved so much that you're able to qualify for a lower interest rate on a new housing loan.

If you can lock in an even lower rate than what your current bank is offering, it will save you money over the life of your loan.

3. If the Fixing Interest Period for Your Housing Loan is Ending

The third reason to refinance is when the fixing period on your housing loan is ending soon.

A fixing period is the locked in interest rate that is set at the start of most housing loans. It is also sometimes called the ‘honeymoon rate’ because things are nice at the start

On the one hand, you may be in a position where you want to pay off your mortgage early and move on with life (provided there are low or no penalty fees for early payment).

On the other hand, if interest rates have been steadily declining since you bought your home, refinancing before the end of your fixing rate period could cost you money.

If this applies to you and if it doesn't seem like either option is really better than the other for whatever reason, then don't worry about it too much at all.

You can always wait before making any decisions about your housing loan — that way there won't be any surprises down the road when interest rates start rising again.

4. If You Can Afford Higher Monthly Repayment Amount

If you're not getting close to retirement and can afford to pay more each month, refinancing may be the right choice for you.

You'll likely be able to get a lower interest rate than the current one on your mortgage, which will result in lower total payments over time. This means that instead of paying off your mortgage in 15 years at current payments, you could pay it off in 10 years (or even less).

5. You Want to Take Out Cash for Something

If you have built up equity in your property want to take some of that equity out in the form of cash, refinancing your existing housing loan could an option worth considering.

You can use the money to pay down other debt, make home improvements or even invest in your business or something else.

If you are thinking about doing this, make sure you talk to Nook to find out which lenders will allow cash-out refinancing before applying, because not all banks provide this sort of mortgage product.

6. You are Looking to Merge Your Debt

If you have credit card debt, student loans, or other high interest debt, you may consider refinancing a mortgage. A refinance, with cash-out, gives you the opportunity to consolidate your debts into one monthly payment and lower your interest rate.

If you have multiple debts, consolidating those debts into one loan can be a good way to pay them off faster. The best thing about refinancing your home loan is that it will lower the payments, which means less interest paid overall.

Should I Refinance My Mortgage?

Refinancing can be a great way to lower your interest rate and save money on monthly repayments. It also allows you to take advantage of interest rates that are lower than what you could get by staying on your current housing loan.

If you don't qualify for a new mortgage based on your income, credit history, or other factors, then refinancing won't necessarily help you save money on monthly payments.

In fact, it could increase them because it's often necessary to borrow more money than needed in order to pay off existing debt.

Things to Consider While Getting a Refinance:

Here are some factors to consider while getting a refinance:
- Know Your Refinancing Goals
- Know Your Credit Score
- Know Your Budget
- Check Different Banks (Nook helps here)
- Pay Attention to Mortgage Terms and Rates
- Shorten the Loan Term As Much As You Can

Refinancing a Housing Loan: How it works

The process of refinancing a mortgage is not as complicated as it may seem. Here's how it works:

You could go to the lender that issued your original mortgage and ask to refinance. The original lender may be able to offer you a lower interest rate on your existing loan or may allow you to pay off some or all of your existing principal balance.

However, this is not very common, and the usual solution is to move your home loan to another bank (with the free help of Nook).

Other banks will then determine whether or not they feel comfortable making the loan based on your financial situation at this time as well as future plans for housing costs.

This could include looking at your credit score, employment history and any other factors that could affect how much money you owe on your current mortgage.

Once the new housing loan is secured, the new bank takes over the housing loan by paying the remaining balance to your original bank to settle the balance, and if cash-out is available, pays you the extra cash for the cash-out amount they have approved.

Conclusion

After reviewing how you can benefit from a refinance, it's likely you'll want to start the process.

Don't be intimidated by the process – that’s what Nook is here to do for you, for free.

If anything seems unclear or if you have any questions, just reach out to our home loan experts today.