After initially taking out a honeymoon loan, Jason returned to his MFAA member to find the most efficient way to finance his extensive home renovations.
Many people refinance their home loan because they're looking for a lower interest rate, lower payments or more flexibility. If that is your goal in refinancing, then you have a wide range of products to choose from. However here we look at some specific mortgage refinancing options people use to deal with some common situations.
If you want to buy a new home, but you have not yet sold your existing home, you could use a bridging loan to tide you over. The maximum you will be allowed to borrow during the bridging period is generally limited to 80% of the combined value of both properties. Bridging loans tend to be at a higher interest rate than normal loans. But when you have sold your original home and repaid that mortgage, you can revert to a loan product with a more favourable rate.
With a normal loan, you borrow the whole amount up front - and start paying interest from day one. The advantage of a construction loan or renovation loan is that you only draw down money as you need it to make progress payments. This can significantly reduce your interest payments.
A line of credit, equity loan or equity line allows you to borrow up to a certain limit - either all at once or in smaller amounts. The advantage is that you only begin to pay interest when you "draw down" these amounts. equity loans give you a great deal of flexibility but you will tend to pay a higher interest rate than for a normal loan.
All in one accounts
At present, you might have separate savings, cheque, credit card and mortgage accounts. The all in one account, as its name suggests, brings all those accounts into one. The advantage of this home loan refinancing option is that money that normally sits in low-interest savings or cheque accounts can reduce your outstanding mortgage - which is being charged interest at a much higher rate.
These are just a few of your mortgage refinancing options. To discuss whether you'd benefit from refinancing your home loan, contact an MFAA member today.