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Refinance a home loan: Reasons to use this tool

1 ИЮЛЯ 2022
Темы
Dicas Euribor Taxas de Juro Destaque Notícia Homepage Compra de Imóveis Comprar Casa em Portugal Crédito Habitação
Refinancing a mortgage is a type of credit that allows the bank customer to reduce the monthly payment, extend the payment terms, and reduce the interest rates by granting his property as a guarantee of payment, more specifically a mortgage guarantee.
Refinance a home loan: Reasons to use this tool
There are several reasons why it is possible to choose to refinance a home loan: to obtain lower interest rates, shorten the payment period, change from a variable rate to a fixed rate or with the purpose of consolidating a debt. 

In this sense, learn about the reasons that can enhance the refinancing of your home loan.

However, these reasons have advantages and disadvantages. When refinancing a home loan you should, as when selecting a loan, analyze the various market offers and evaluate the current rates in order to establish when is the best time to opt for refinancing.

#1. Getting lower interest rates
One of the most common reasons for refinancing a home loan is to lower the interest rate on the home loan.

When you refinance you will have to do a new deed, so you may have to bear this cost if the lender does not do it. This way, check with your bank to see how much you may have to pay for the deed and how much you can lower the interest rate in order to understand if refinancing is worth it.

Another way to obtain better conditions is to make a transfer of the mortgage to another bank entity. This transfer usually represents a significant saving depending on the term and the amount outstanding.

#2. Lower your mortgage payment
If you are struggling to meet all your monthly expenses, you may consider refinancing, since one of the advantages of refinancing is that you can lower the monthly payment on your home loan and thus ease your debt burden.

At the same time, by increasing the payment term of the home loan, the monthly payment will decrease.

#3. Changing the rate mode
Another motivation for refinancing a mortgage is to change the interest rate. A few years after the loan was taken out, certain changes may occur in the market that make it more beneficial to switch from a variable rate to a fixed rate.

The variable interest rate is indexed to Euribor, i.e., it fluctuates with changes in this index, while the fixed interest rate is contracted between the client and the bank and remains fixed for the life of the contract.

It is important to validate the changes that occur in the market in order to verify which type of rate can be more appealing for the credit.

#4. Consolidate debts
Refinancing can also be used for credit consolidation, that is, a consolidated credit with a mortgage guarantee. 

When you refinance a home loan, you give your property as collateral, which can be your own permanent home, a second home, such as a vacation home, or another property you may own. In certain cases, the bank also allows you to take out a second mortgage on the same property.

In this sense, by resorting to a consolidated credit with mortgage, you may find it easier to manage your family budget, reducing the amount of your installments and lowering the cost of credit through the reduction of interest rates.

It should be noted that to opt for a consolidated credit with mortgage you must know the market value of your property and, in case you wish to take out a second mortgage, understand the total value of your mortgage so that the bank can assess the LTV (Loan-To-Value) and establish if your request is eligible. As a rule, the LTV ratio is up to 80%.

Is it really worth refinancing?
Refinancing a home loan can be a good solution if you can reduce the monthly payments, shorten the length of the loan or lower the interest rate. When used wisely, this can be a good tool to keep your debts under control.

However, before refinancing you should take into account your current financial situation, ask yourself how long you plan to stay in the same house or how much money you will save if you choose this option and don't forget to check out all the offers out there to make sure you make the best decision at the right time.
Темы
Dicas Euribor Taxas de Juro Destaque Notícia Homepage Compra de Imóveis Comprar Casa em Portugal Crédito Habitação
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