Mortgage Rates Chicago

When it comes to mortgages, many individuals don’t refinance. A substantial number are unaware they have the choice of shifting their loan to another financier; others are simply indifferent. They stick with their very first lender and the “reward” for such loyalty tends to be higher interest rates. Due to the magnitude of mortgages and the tenure that the housing loan is amortised over, the interest we are speaking about here can easy extend from thousands to hundreds of thousands of dollars. Take a look at the following elements to see whether it’s time for you to consider refinancing.

Current Mortgage Interest Rate

It is decidedly a good indication for you to research refinancing when your current interest rate is higher than available loan packages on the market. A first step to take is to go back to your existing banking company or financial institution and ask them to revise your package, otherwise known as repricing. If your lender comes back with an offer, it will normally be better than your existing one. You can then compare this offer with offers from other lenders to see whether you should switch or stay put.

Lock-in and Clawback Periods

When you take up a mortgage, there may be a lock-in period where your housing lender will charge you a penalisation fee, normally a percentage of your outstanding loan amount, if you were to fully repay your home loan. Almost all home loans also come with a clawback period where the lender will claim back “freebies”, such as legal expenses, that they “gave” you when you take up your home loan (Note: lock-in period is separate from clawback period). It may not be commendable for you to refinance due to such costs.

Loan Quantum

The larger your mortgage amount, the larger your savings for the same reduction in interest rates. For example, 1% on a loan of S$100,000 is much less than 1% on a loan of S$500,000. However, fixed cost to refinancing, which represents mainly of legal fees, do not vary much with loan quantum. The difference between your existing and refinancing interest rates, therefore, has to be bigger for a relatively smaller home loan as fixed cost eats into a more substantial share of your interest rate savings.

Perceived Interest Rate Movements

Your view on how interest rates is moving can be a factor when thinking whether you should refinance. If you are currently on a fixed rate package and think interest rates are dropping, you may want to refinance to a floating rate package. Conversely, if you are on floating rates and believe interest rates are skyrocketing, shifting to fixed rates may be a positive choice.

Individual Financial Assessment

If there is a change in your financial state, you may want to change your package details via refinancing. For example, you are opening your own business organization and do not want unpredictability in other areas. Give some consideration to taking up a fixed rate package. Maybe you want cash to invest in different property. Consider increasing your loan quantum. Or your monthly income has increased and you want to reduce interest loan payments. Contemplate reducing your loan tenure.

If looking through this article is giving your a headache or you simply want to save yourself the trouble, contact us for a non-obligatory mortgage consultation. Our professional consultants not only frees up your time but also do not charge any fees to help you get the best deal. Refinancing does not have to be a irksome process.

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