Refinance with a Flexible Home Loan – Turn your mortgage restrictions into cash savings
If you’re feeling too constrained by your current home loan repayment plan, it’s time to reconsider your options.
Let’s look at four ways your current home loan is limiting you:
1) You have payment limits.
You just have to pay the amount due depending on your current debt and the interest rate you maintain.
2) You can have significant cash flow fluctuations when you have to support recurring and expected large annual expenses during the year.
This creates some cash flow problems for the period and cash shortages.
3) You have large fluctuations in cash flow due to large annual expenses (eg summer vacations).
Similar to the previous one, but much larger in size. When that happens, and you already know when it will, you just need an extraordinary effort to manage your finances.
4) Oh, sure, it’s possible that you’re paying very high interest rates and you’d just like better loan terms. But of course, your current terms tie you to your current payment.
The two steps to a better path
1) Find a type of home loan that gives you more and allows you to overcome these problems.
2) Refinance your current home loan with the new one.
Well, if you suffer from “loan flexibility syndrome,” you’re in luck. In fact, there are currently equity loans that are designed to help you. They are “Flexible Home Equity Loans”.
These are equity loans that allow you to make overpayments to reduce debt (i.e. interest), pay underpayments when you’re short on cash (if you’ve overpaid before) and skip a payment in the year if your previous overpayments have provided you with sufficient margin.
How will we replace our current loan with a new one? Well, refinancing, that is. request for a new loan, which with new conditions, which will repay the previous one. So it is a way of replacing the old loan with a newer one based on new contractual terms. It is important to use the new terms for three different points:
1) contractual flexibility (what you are looking for);
2) interest rate paid (for fixed rate mortgages) or spread paid (for underlying equity tracker mortgages);
3) lower costs.
So what are the 5 steps that allow us to do this?
1) Ask your current lender
Ask if they provide flexible loans and what you can do if you need more flexibility.
2) Research the market
As you can see, researching the market is essential when considering loans, as payday loans, home equity loans, and other loans change in rates. Check for lenders online and track their offers.
3) Exploit the market proposition
Because home loans and remortgage loans are common, there are a variety of loans to choose from—and most have their own options. Understand the market offerings and what makes them different.
4) Use market competition
Mortgage companies compete against each other, with others offering some of the best rates on the market. Take advantage of this market competition to get lower interest rates and near-zero borrowing costs.
5) Close the deal
First, ask your company for a refinance. Use what you’ve gathered in the previous steps (ie, what your lender’s competitors want to do to you to win a new customer) to facilitate your negotiations.
If your company is deaf, ask another company to give better terms and use the new money to close the previous debt to the old creditor. Note the termination costs of the previous contract (there are usually penalties associated with anticipated termination).
So we have a new contract. Then?
1) Use overpayments to reduce interest paid
Since flexible interest rate home equity loans offer you the opportunity to overpay your mortgage, do so as soon as possible and as often as you can.
In fact, overpayments will reduce the debt, so you’ll pay less interest regardless of what happens to interest rates.
2) Use underpayments
If you have overpaid ‘enough’ (depending on the contract you signed) then you can also ‘pay less’ towards a mortgage, provided you have made the minimum required amount and number of payments.
3) Take advantage of the vacation package
Since these loans also provide “vacation packages” for underpayment, go for it! So if you pay enough overpayments, you can stop payments for a month to take a vacation. This will reduce the biggest cash flow problem we talked about.
Flexible interest rate equity loans are certainly a method of mobilizing your resources to improve your equity loan. If you feel that your home equity loans are too much of a limitation, consider this option.
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