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Refinance Loans

Refinancing is the process in which one replaces the original mortgage loan with a new one to take advantage of lower interest rates or better terms or to get cash. An alternative is taking out a second mortgage, which involves the same process as refinancing, but adds another mortgage on the property.

By refinancing your home mortgage, you can obtain a new loan to pay off an existing loan or pay off one loan with the proceeds from another. It's a good idea to refinance your properties when interest rates drop and/or the property has appreciated in value - you can lower your monthly payments, effectively lowering the cost of the mortgage. Some of the other advantages of refinancing your home loan are:

• Getting access to the equity in your property for investment purposes or
  instead of taking out a personal loan;
• Obtaining a more flexible loan product than your original home loan;
• Debt Consolidation purposes;

You do however need to consider the following in making your decision:

• Payout Penalties imposed by your current lender. These can be quite high especially if you have recently taken out a fixed rate or a Honeymoon loan. If this applies to you, it is best to wait until you are out of the penalty period;
• Your outstanding mortgage. If your balance is quite low and you do not intend to draw out any of the available equity in your property in the immediate future, then Refinance may not be cost effective in your circumstances;

It is always best to calculate the savings anticipated from the proposed refinance to the additional costs you are likely to incur from this process before making any final decisions.