A: Refinancing means taking out a new home loan for the difference in value between your property’s original purchase price and its current estimated value.
This extra money can then be withdrawn to pay off more expensive debt like credit cards or personal loans or be kept as equity in the bond.
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One of the main benefits of refinancing is the opportunity to secure a better interest rate than on your original bond. This can effectively reduce monthly repayments (assuming the equity is not withdrawn), making it a valuable tool for homeowners struggling with cash flow.
However, it’s important to note homeowners will have to cover the refinancing costs, including bond registration fees, legal costs, VAT and deeds office levies. Your bond originator can help you assess whether the short-term costs are worth the potential benefits of refinancing.
It’s not a one-size-fits-all solution, so it’s important to discuss the options as they relate to your specific circumstances. – Leonard Kondowe, national admin hub manager for Rawson Finance