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Is it worth it to refinance mortgage?

If you’re a homeowner wanting to lower your bills without affecting your lifestyle, remortgaging could be the answer, but is it worth it to refinance your mortgage? The main advantage of refinancing your mortgage is to drop your interest rate thereby lowering your monthly expenses of shortening the mortgage period if you maintain the same monthly payment.
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Advantages of refinancing

As the years go by and you gain more experience at work you’ll tend to earn gradually more money year on year. With the passing of time your credit rating should also improve as long as there are no major financial problems along the way. If these two things happen, your credit scorewill increase steadily so you’ll have the chance to take out loans that come with lower rates of interest. This can have a major impact on your monthly outgoings so it’s something to be aware of.

Refinance for large purchases

Another reason refinancing your mortgage makes sense is that you can release capital to use for a major purchase. Buying a car, going on an expensive holiday or even reducing your credit card balance with a refinanced mortgage, makes more sense than trying to achieve your aims with other forms of borrowing. Of course, you’ll either be extending your loan period or increasing your monthly repayment amount unless you find that you’re eligible for a lower rate of interest.

Risks

The major risk associated with refinancing your mortgage is the financial penalties attached to your current loan. Provisions in your mortgage agreement allow the lender to charge very high fees if you terminate the contract early. You’ll need to make sure that the savings made with the new mortgage cover these penalty charges adequately. If not, remortgaging probably won’t make financial sense.

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