Posted by Oze Parrot on 7th June 2007
You are young, have a good job, work hard, raise a mortgage and buy a home, which is possibly the biggest single investment that you will ever make. That’s fine, the children are young, the job pays well, the mortgage repayments remain stable and you and your family are quite comfortable.
Several years pass by, and for one reason or another, the mortgage repayments become a burden. There are a number of factors that contribute to this situation, your family is growing, inflation rates are increasing, the value of the dollar is decreasing, property values in your area are rising, along with council rates and also interest rates have escalated.
Unfortunately, any wage increases that you may have had, have not kept pace with your continually increasing household expenses. Without the aid of an unforeseen windfall, this means a drastic lifestyle change with the possibility of a foreclosure.
The alternative, of course, is to refinance your mortgage which will substantially lower your mortgage repayments, allow you to maintain your standard of living and secure your initial investment.
When refinancing your home mortgage there are several pitfalls to be avoided.
Be mindful of the fact that you will be doing business with this mortgage company or brokerage for many years so you will need to choose wisely. Make sure that you are dealing with a well known company and engage the services of a reputable financial adviser who will inform you of any terms or conditions, written into the refinancing company’s agreement, that may not be in your best interest.
An independent financial advisor will have a large number of money lending institutions from which to choose, and therefore, should be able to provide you with an acceptable refinancing plan.
There are many types of refinancing loans including, complete term loans, overdraft loans or loans with a redraw facility. Things to watch out for are the penalty clauses, the interest rate structure and the companies terms and services agreement.
Are there any penalties for early settlement? Make sure that the loan company is not enforcing exorbitant penalties for early settlement.
Are the interest rates fixed, if so, for how long? Make sure that the loan company does not have an interest rate hike built into the agreement after the first year.
A loan that has fixed interest rates could result in a great saving by reducing the amount of interest you will have to pay over the term of the loan. On the other hand, a fixed interest loan agreement will incur a higher monthly premium. A flexible interest rate is somewhat cheaper in the short term, but your premiums will increase accordingly with any increase in interest rates. It is therefore advisable to have your initial interest rate fixed for the first three years of the loan.
Seek advice from reliable sources. A reputable mortgage broker will professionally guide you through the steps that you need to take to refinance your mortgage, which will save your home from foreclosure, retain your lifestyle and possibly, save your marriage.
For further information visit our web site at: Home Mortgage solutions
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