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Refinancing A Mortgage

Refinancing a mortgage to consolidate unsecured loans into the mortgage repayment is probably the simplest and most effective way to reduce your monthly payments.

The process of doing this is usually fairly simple. There are, however, a number of variables that can make the matter quite complicated and need to be taken into consideration before making inquiries to lenders. A trusted finance broker can be the best person to assist you in refinancing a mortgage.

Serviceability, or the capacity to keep monthly repayments is an important factor when trying to consolidate unsecured debt into a mortgage. Each lender has their own criteria for calculating the amount they will lend. Some lenders are very conservative and others very generous.

Weigh Up The Risk

It is always very important to weigh up the risk factor in exposing an owner occupied dwelling to excess debt. If serviceability is an issue and the debt is high compared to the value of the property, you may want to seriously consider the risk in refinancing a mortgage.

It may be a relief to consolidate unsecured loans into the mortgage. Please bear in mind that if payments are missed through loss of employment or illness, the lender will invariably list these as dishonors and defaults and your credit rating may be affected. If several payments are missed, foreclosure on the property may become an issue. Although no one thinks it can happen to them, especially for young couples, it's advisable to get some form of risk management in place in case any adverse situation does arise. Minimizing the risk through the proper insurances will reduce the risk factor of you losing house and home.

Valuations

Land valuations are another variable affecting borrowing capacity. With unsecured loans readily available, it is seemingly easy to rack up debt on unsecured loans. The combined credit limits on unsecured loans may outweigh the possibility of consolidating these and refinancing a mortgage. The value of your property together with your ability to service the loan will dictate whether or not you will be able to apply for a full consolidation.

The property valuation may also come in low. You must then choose between maintaining the mortgage borrowing limit at 80% of the value of the property or to extend that up to 90%. In taking this step, you'll end up paying lenders mortgage insurance on top of the loan. Again, a trusted finance broker will supply you with all associated costs to help you in this decision.

If the limits on consolidated credit cards together with the balance owing on the mortgage exceeds the available re-drawable equity release on the property, then it may not be possible to consolidate all unsecured debt into the mortgage. At least paying out those credit cards with the highest interest rates will reduce the financial burden.

Having a mortgage facility that enables you to reduce the payable balance quickly will also allow unsecured debt to be paid from the equity as it becomes available. Either way, your finance broker will be able to demonstrate which facilities will work best for your particular requirements in refinancing a mortgage.

Beware of Late Payments

All lenders will want to see the last six months bank statements to check your repayment history. They'll also check your CRA. This is the list of registered inquiries and loan applications made generally over the last five years.

If there is any hint of a colorful past, lenders may even go back further in time and check records up to twenty years. Bankruptcies, defaults on credit and too many inquiries will generally result in a decline notice with prime lenders. Your finance broker will assist you in finding the right solution in refinancing a mortgage.

First and foremost, before we continue on a downward spiral of ever-increasing debt, in order to get onto the path to financial freedom we've got to do something about getting into the right mindset.

If you've got any questions about refinancing a mortgage, then leave your details and I'll have a trusted colleague get back to you ASAP so as to help you on your way to financial independence -

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