Refinancing and refixing are both options available to homeowners to improve their financial situation or to adjust the terms of their mortgage.
In this article we dig into some pros and cons of each finance option:
Refinancing your Home Loan:
- Lower interest rates: Refinancing can help homeowners to secure lower interest rates on their mortgage, which can lead to significant savings over the life of the loan.
- Shorten the loan term: Refinancing can allow homeowners to reduce the term of their mortgage, which can help them to pay off their loan faster and save money on interest charges.
- Convert to a fixed-rate mortgage: Refinancing can allow homeowners to switch from an adjustable-rate mortgage to a fixed-rate mortgage, providing more stability and certainty in their monthly payments.
- Settlement costs: Refinancing typically involves settlement costs, which can be expensive and eat into any potential savings from a lower interest rate.
- Qualification requirements: Refinancing may require homeowners to meet certain qualification requirements, such as credit score or debt-to-income ratio.
- Resetting the clock: Refinancing can reset the clock on a mortgage, meaning that homeowners may end up paying more interest over the life of the loan if they extend the term.
Refixing your Home Loan:
- Lower interest rates: Refixing can help homeowners to secure lower interest rates on their mortgage, which can lead to significant savings over the remaining term of the loan.
- Keep the same lender: Refixing allows homeowners to keep their existing lender, which can save time and hassle compared to refinancing with a new lender.
- No closing costs: Refixing typically doesn't involve any closing costs, as the mortgage terms are simply adjusted.
- Limited options: Refixing typically only allows homeowners to adjust the interest rate on their existing mortgage, without the ability to adjust other terms or features.
- Less flexibility: Refixing may not offer as much flexibility as refinancing in terms of choosing a loan term, interest rate type, or other features.
- Miss out on potential savings: Refixing may not offer as much potential for savings as refinancing, especially if interest rates have dropped significantly since the original mortgage was taken out.
Ultimately, whether to refinance or refix a home loan depends on the individual homeowner's financial situation and goals. It's important to consider the potential benefits and drawbacks of each option and we fully recommend that you consult with a financial advisor or mortgage professional before making a decision.
Here at Money Compare we are partnered with The Umbrella Company - specialist mortgage advisors who can help you make a fully informed choice on whether to refix or refinance your home loan.