Mortgages - When to Refinance

By: Joe Daly,
Daly Investment Planning Ltd,
Ballinrobe,
Co Mayo. (094 952-0921 or e-mail: info@dip.ie )

When to Refinance
One common type of refinancing is when you have a variable rate mortgage and you refinance to a fixed rate or lower variable rate. Your mortgage payments on a variable rate mortgage will adjust with changes in the European Central Bank market rates - so when interest rates drop, your monthly payments are likely to move down after a short period. However with a fixed-rate mortgage, your interest rate stays the same for the entire chosen term of your fixed period (one, two, three year etc…) The predictability that comes with locking in the same interest rate for as long as you live in your home is one reason why changing from an variable rate to a fixed-rate loan is one of the more popular refinancing choices - especially when interest rates are falling. Other options are having a split mortgage, which is a combination of a fixed, and variable etc….

You may be someone who may have taken advantage of the traditionally lower interest rates in the first years of your variable rate mortgage- and now that your monthly mortgage payments have increased, refinancing to a fixed-rate loan may look attractive. You should work with a Financial Advisor to compare the rates, margins etc, before you decide to refinance to another type of variable rate or institution. It is important to understand how often your mortgage will adjust and how much your payment can change with each adjustment over the life of the loan.

You may be interested in changing from one kind of variable to another or refinancing with the same kind of variable to get a lower interest rate. Be sure to ask your current lender whether any conversion terms apply or if there are costs to convert to another type of mortgage no matter what type you may have.

Where to start.
A good place to start when considering whether to refinance is to ask yourself several questions. How long do you plan to stay in your current home? Are you proposing to purchase another property in the next few years and how will this be financed? Are you financially stretched now? Are the current mortgage rates more attractive than the one you have? How much equity do you have in your home? (i.e. how does your loan outstanding compare to the market value of your Property).
You may want to take advantage of the current low interest rate environment to reduce your monthly mortgage outgoings or you may want to build the equity in your home faster by looking at paying a shorter-term mortgage. Ask questions off your advisor regarding current rates as well as any costs associated with refinancing such as legal, government duties etc.

You may want to start your search for a new mortgage with the lender you used the first time. Sometimes, this lender will give you a better deal to keep you as a customer. You can also get refinancing information from an Independent Mortgage Advisor such as Daly Investment Planning ltd.

Today’s Homeowners are looking to take Advantage of the Refinancing Surge to reduce outgoings or purchase other properties.
You've probably heard talk recently about whether now is a good time to refinance your existing mortgage. People feel it is a good time for this. Refinancing your current mortgage may lower your monthly payment, allowing you to use the equity that has accrued since the purchase of your home. Or you may choose to change your 20 to 30-year mortgage to a 15-year term or get a fixed-rate mortgage to replace a variable rate.

Be careful if you are doing this to purchase property abroad. Ensure you realise the risk factor.