How to Negotiate A Better Deal
Getting a better deal on your mortgage is now possible by a process that is known as REFINANCING or REMORTGAGING. Refinancing / Remortgaging means paying off an existing mortgage and taking out a new one or changing the terms and conditions on an existing mortgage.
Homeowners may choose to refinance/remortgage for any number of reasons including:
- Lower the interest rate on their existing mortgage
- Change a loan type
- Own their homes faster
LOWER INTEREST RATE
Obtaining a lower interest rate on an existing mortgage is a major reason homeowners choose to refinance. By refinancing to a lower interest rate, homeowners can reduce their monthly repayments.
CHANGE THE LOAN TYPE
Homeowners with a variable rate mortgage can change to a fixed rate by refinancing either with their existing lender or a new lender. This option can offer protection against rising interest rates and some peace of mind in the long term. As internet rates rise, so will mortgage repayments. Homeowners with a fixed-rate mortgage will have no increase in their monthly payments for the duration the rate remains fixed, i.e. 2-years, 5-years, 10-years etc. It is also possible to switch from a fixed to a variable rate mortgage. However, there are often costs associated with this option but the benefits can outweigh the costs over time.
OWN YOUR HOME FASTER
Refinancing helps people own their homes faster. Homeowners can do this by refinancing their existing mortgages over a shorter term, reducing from say 30-year to a 15-year term. This option will work for those who can afford to absorb higher monthly payments. Generally, the longer the term on a mortgage, the more interest paid so a €100,000 mortgage with a 4.5% APR over 30 years will accrue interest charges of €82,406 while the same loan over a 15-year period will accrue interest charges of €37,678, a difference of €44,708. Mortgages should be reviewed and managed on a regular basis (about every two years). This example is used for illustration purposes only.
DO YOUR HOMEWORK
Homeowners should always do their homework before they proceed with refinancing as there are usually some fees (including processing fee, solicitor’s fees etc.) charged. Consulting with an independent mortgage advisor is one way homeowners can do this. By knowing the costs involved homeowners will be in a good position to decide whether or not refinancing is right for them.