In these uncertain times, people are looking for ways to lower
the monthly payments on their loans. The good news is refinancing can help with
that and save smart money over time. Loan refinancing is used for all types of
credit, including mortgages. Usually, the new loan that you are about to take
will come with better terms than the old one. However, it depends on various
factors – your credit score, how much you have already paid, etc. That is why
it is important to weigh the advantages and disadvantages before applying. We
will point out some of the reasons why you should consider refinancing a
Certainly, one of the best reasons to refinance mortgage loans
is that you can obtain a lower interest rate. If you think the interest on your
current loan is too high, you can try to find a lender offering more favorable
terms. It is possible to reduce your interest by 2% or more. There are
convenient online calculators that will help you make the necessary costs
estimate and see if loan refinancing will be worth it with the particular
When you reduce the interest rate, you save money but also build
equity in your home. This means that you will have a better chance to sell the
property later on for more than you owe on your mortgage loan. Plus,
refinancing might decrease your monthly payments. Most people use the services
of banks for such loans. But the truth is, in almost every bank the process of
taking out a mortgage and refinancing it later is quite complicated.
For more flexibility, you can try applying at non-bank financial
institutions like CreditTrust, which is a company registered by the Bulgarian
National Bank and offers interest of 1% per month and 30-minute approval.
Mortgage loans over 10,000 lv. are granted regardless of credit history and
proof of income. Credits from this institution can be used for loan refinancing
from another company, payment of obligations, household needs, etc.
Logically, taking out a new loan is associated with an extension
of the payment period. But not in this case. When refinancing an existing
mortgage loan, you have the chance to get a shorter term without much change in
your monthly payment. For example, if you have a 30-year mortgage with a fixed
rate and refinance it, the term can be cut in half. If you are switching from
9% to 5-6%, the change in the monthly payment will be slight.
Some people are afraid to refinance for a shorter term because
they think it will be very hard to pay the increased installment. But as you’ve
seen from the example above, it might not be much higher. If your goal is to
get rid of the mortgage sooner and pay the least amount of interest possible,
refinancing for a shorter term would be a great idea. You should read
everything in detail when looking for offers. The terms and conditions may be
different from those of the personal loans you are used
Lots of homeowners decide to refinance to consolidate their
debt. This decision is actually not bad at all. Replacing a high-interest
mortgage with a low-interest loan sounds well. But another problem often occurs
– most people start spending a lot once refinancing relieves them from debt.
Anyone who has generated debt on credit cards or different purchases is likely
to do so again after the refinance of the mortgage gives them the available
credit. So, only take this step if you are sure you can resist the temptation.
If you pay the minimum on other loans or credit cards, you can
end up paying for decades. But with mortgage refinancing the picture is much
clearer – you know how much you will pay and when exactly you will have the
whole loan paid off. The interest rate for your mortgage after refinance will
be lower than these of unsecured personal loans. Therefore, consolidating debt
can be really useful for you.
Keep in mind that refinancing a mortgage loan is still a pretty
serious decision. You can’t take it just like that under the influence of
strong emotions. It is important to research as many offers as possible from
different lenders. Don’t forget to read everything down to the smallest detail
before signing a contract because there is no going back. Like any financial
service, refinancing has its benefits and drawbacks. Whether it is a suitable
option depends on the individual situation and capabilities of the user.