What is refinancing
Refinancing means moving home loan from one lender to another. Essentially, when you refinance to another lender, it’s considered a whole new loan to them.
There are many reasons to consider refinancing, for example.
The new bank can offer a better interest rate, and the long-term savings as a result are greater than the fees incurred when switching loans.
Consider buying an investment property and the original bank has strict approval conditions, Refinance to a new bank that can approve a higher loan amount.
To gain equity in your home for renovations, investments or travel.
If your fixed-rate term is coming to an end and you want a more suitable rate or a more flexible home loan.
To consolidate debts such as personal loans, auto loans or credit cards into your mortgage to make it easier to manage your finances.
When you refinance, you can also use it as an opportunity to use some of the cash from your home’s value toward other costs: “Essentially 50% of the folks are pulling cash out, and they are looking at either reinvesting that money in other properties or sending their children to college or something like that,” English explains.
Other times, homeowners want to refinance in order to change the term of their current mortgage from 30 years to 15 years. Depending on the interest rate you qualify for, this may only slightly change your monthly budget while helping you pay off your loan faster.