Why Refinance Mortgage

As a general principle, refinancing is when interest payments fall by 2 points or more. If you have a $100,000, 30-year, fixed-rate mortgage at 10 per cent, for example, you will be paying more than $215,000 interest over the next 30 years. However, if you have a $100,000, 30-year, fixed-rate mortgage at 8 per cent, you will be paying less than $165,000 in interest over the same amount of time.

In many cases, the two-percent principle makes good business sense, but sometimes it makes good business sense to refinance even if interest only falls by 1.5 or even 1 per cent. House owners who are planning to keep their houses for many years can still benefit from the refinance if interest falls below 2 per cent as they have many years to cover the cost of setting up a new mortgage credit.

A further general principle is refinancing if your interest saving covers all borrowing charges in two years or less. As a general principle, refinancing is when interest rate falls by 2 percent or more. A lot of home owners are refinancing themselves to cut their mortgage repayments. When you have accumulated capital in your home, you may also consider substituting your old mortgage for a bigger one and taking out a portion of the capital you have accumulated as money for consolidating debts or other purposes. Your mortgage will be used to pay off your debts.

Alternatively, you may want to use the savings in interest to decrease the length of your mortgage. E.g., a $100,000, 15-year, fixed-rate mortgage at 8 per cent will charge you less than $75,000 in interest over the next 15 years - up from $165,000 for a 30-year mortgage. A further way of shortening the duration of the mortgage is to make additional payment where possible.

Sometimes you can also create a semi-annual mortgage repayment schedule with the mortgage provider to reduce the mortgage time. When you have a variable interest mortgage (ARM) and the interest levels seem to be going up, you might consider substituting a fixed-rate mortgage for your existing one. A few individuals choose the certainty of having a clear idea of what their mortgage interest will be, rather than thinking about whether - or how much - they might rise in the near or distant future. What is more, some individuals want to know what their mortgage interest will be?

A mortgage can be refinanced for many different purposes. They should assess the pecuniary implications of funding as part of a solid budgeting policy.