Refinancing for changed circumstances
You aren't the person who arranged that mortgage
The world just keeps on turning. Empires, corporate and military, rise and fall, fashions change, fortunes are made and lost. And in your life, things change year by year. For many of us, they change for the better: increasing financial security, more stability, an improved credit rating based on years of sensible living. If that description comes anywhere close to describing you, it's likely that you could benefit from refinancing your mortgage.
You see, when you first took out the mortgage, your lender made a lot of assumptions about you. You didn't get the same rate as everybody else who walked through the glass-plated bank doors that day. Oh, no. You were being judged, catalogued, and interpreted in a dozen different ways. Minds human and computer were second-guessing the course of your life, gazing into crystal balls of silicon and statistics, and endeavouring to pin you down to a tiny niche. If you'd had a different job, a different past, a different situation, you would have been given offered a different rate on your mortgage.
And now, you are that different person. You're likely to be different in ways that lenders like, as well. You've been holding down a mortgage for, what, a few years now? That gives you a lot of points with the credit rating agencies, assumiing you've made most of your payments on time. You've not gone mad, run to the hills and formed a guerilla army? You've not turned to drink, drugs or crime? It doesn't have to be anything dramatic that you've done right over the past few years: as long as you've not done anything spectacularly wrong, you're probably a better credit risk now than you were when you took out your mortgage. Your current lender might not be willing to acknowledge that by lowering your premiums, but if you shop around you'll find dozens of other lenders who will. And that, my friend, is the beauty of refinancing.
Finding your niche
The refinance market, like the rest of the mortgage market - indeed, like most of the financial market you'll deal with - is constantly trying to fit you into a niche. Fall into a lower-risk niche than the one you were in before, and refinancing is very likely a good option (refinancing may work for you even if you're in exactly the same niche as before - but it's less obviously compelling). Let's look at some of those niches, and how you might have moved into a better one.
Your employment status is one of the biggies. If you were self-employed or in temporary work when you took out the mortgage, you will have been at a serious disadvantage in the mortgage market. This is true for either partner, and it's something which commonly plays against couples who are starting a family. You buy a new house for your baby to grow up in, and at the same time one of you is taking time off for pregnancy and childcare. Having one of the couple effectively unemployed makes lenders nervous, and so costs you money as you fall into the wrong niche. But now it's five years later, you're both working, and you look like less risky borrowers. So you refinance, take advantage of that greater credit-worthiness, and you could find that this refinancing slashes your mortgage bills.
Your home has increased in value
Mortgages typically become more expensive as they account for a larger and larger portion of the value of a property. If your home has appreciated in value, either because of home improvements or because of the changing property market, then you could refinance your mortgage to be worth the same amount of money, but a smaller fraction of the value of your home. This could allow, in some circumstances, for slightly cheaper payments.
Credit rating
Like any other lender, mortgage lenders will find out your credit rating before they offer you a refinance loan, getting figures from one of the rating agencies to tell tem how often you have missed payments on other debts.
The thing to notice about credit ratings is that they improve as time passes, and as you borrow more money and pay it back responsibly. So if you have been careful about paying your bills over the years since you first bought your house, then you will have built up an improved credit rating. This better credit rating will, again, push you into a better borrowing niche, enabling you to get a mortgage refinance on improved terms.
You need more cash
Another way your circumstances might have changed is by you having a greater need for some money. In this case you will be able to conduct what is known as a "cash-out refinance", increasing the amount that you are borrowing on your mortgage. This can compare favourably to borrowing in other ways, although of course it leaves your home at risk if you can't make the payments.
There are several ways to understand what makes this a plausible way of getting money out of your house. Firstly, you have probably paid off a certain amount of your mortgage in recent years. You can therefore use a home equity loan to bring your mortgage back up to the point where it was previously. This is equivalent to setting back by some time the date when you will finally have paid off your mortgage, and in return getting a lump sum. Because of changes to your employment circumstances and credit rating, it might even be possible to improve on the amount of mortgage you could borrow, maybe even increasing it beyond 100% of the value of your property.
All this shows that it can make sense for you to refinance, if your circumstances have at all changed from the time when you took out your initial mortgage. Don't forget that their are costs to refinancing - the notorious points system being one of the biggest catches - but at the same time, don't let fear put you off getting a better deal by refinancing your home mortgage.
What we have to offer
We offer you the opportunity to get all of the information that you need. It's very simple to just fill out our form, and we will do the rest. You will receive all of the information on refinancing for your local area. You can search for lenders for free and get the best possible quote. The information you submit is secured, private and confidential and you will never receive spam mail from us.
We will help you get the best rates from up to four lenders. There are no obligations, no credit checks, and no social security number required. It takes just one minute to fill out the secure online form, up to four of the best lenders in your area will contact you and you can then choose the best lender at your convenience without the hassle of having to do all the research for each individual lender. We do that work for you.
