With speculation that interest rates on different types of loans, including mortgages, will increase over the next year, now may be the right time to think about refinancing your current mortgage. Here are a couple of things to keep in mind as you determine if this is a good option for your household.
For people who have floating or variable rate mortgages with no limitations on how high that variable rate can climb, looking into a fixed rate is a prudent idea. In the event that interest rates do perform as predicted, the switch could mean a substantial savings, assuming the fixed rate you can command is within reason. Ideally, obtain a fixed rate that is as close to the current average rate as possible, and be mindful of any provisions in the contract that could allow the lender to increase that rate at a later date.
If the value of your home depreciated over the last few years, and the current balance of your mortgage is more than what your home is worth, refinancing may not be an option unless you can afford a deposit to offset the difference. Even if you can, consider the amount of time you have left on the current mortgage, and use a reliable mortgage calculator to determine how much, if anything, you would save by refinancing and applying another deposit to the amount due. In some cases, you’ll find that between the change in interest rates and the security of knowing your rate will not increase as the average rate rises, the effort is worth the trouble.
Tags: mortgages
