For most people, a house is a key investment for life. This is especially true for those who had just started a family. The need to have a roof over our heads often lead us to go house hunting almost on a whim.
In such situations, we tend to judge this “big purchase” more on aesthetics rather than our projected ability to repay this investment. Therefore, when times are hard (and it will eventually hit every generation) and money is tight, most of us find that instead of having a reduced repayment period, we end up paying mortgage refinancing charges.
Of course if mortgage refinancing is such a bad thing, nobody will use it! So what makes people consider mortgage refinancing?
Mortgage refinancing, if used correctly, can be a powerful tool to reduce interest costs. A typical housing loan stretches for more than 20 years and the cumulative interests, although seemingly small; is actually quite significant.
By refinancing your mortgage you get to “borrow time” by reducing the monthly payment for your home albeit for a longer repayment period. Nevertheless, the interest charged for mortgage refinancing is significantly lower in most parts of the world compared to credit card interests for example.
Therefore, you can offset these high interest debts with the short term savings obtained from the refinanced mortgage for your house.
Also note that if your house loan repayment period has already matured and fully paid off, you can still take up mortgage refinancing to obtain a significant amount of cash almost immediately. This money can then be used for investment or other wealth building instruments that are time sensitive.
So think about it, mortgage refinancing is not really a “dirty phrase” now is it?