Having my own home has been my ultimate dream for my family. Ever since I was a kid, we lived in rented homes where the owners visit every month and my parents would have to pay them monthly dues. It's fine if they have enough cash on hand, which is not always the case. It would be very difficult if they can't pay and the deadline is already coming near. So when I had the chance to make a home loan, I grabbed the opportunity to buy the home where we were at when they put it up for sale.

Since I've worked for almost 5-6 years already, I've been a regular tax payer so applying for a home loan in Pagibig was not too hard. I don't have a big salary at that time so we opted to choose payment for 30 years. It is more or less P6000.00 a month which we were able to pay regularly by combining me and sister's salary. Fortunately, till now, we were able to have good standings when it comes to paying monthly and now that I work as an OFW, I've been thinking of refinancing.

For the record, I am not an expert in refinancing. I am a nurse by profession. But I wanted to explore the possibility of applying refinancing on my current loan. I did a little research and what I will share in this blog are what I've read online and how I understood the concept.

What is Refinancing?

It is paying your old mortgage by applying for a new loan, either from a bank or from a lender. It is usually done to get a lower interest, to take advantage of turning some equity they earned from the home and turn it to cash or in my case, to shorten the payment term.

Types of Refinancing

1. Rate and Term Refinance - This is getting a new loan with a smaller interest and a possible shorter payment term. Obviously, you will have a higher monthly payment.

2. Cash-out Refinance - This is refinancing up to 80% of your house's current value. For example, my home is valued at P1,000,000.00 and I still have a loan of P600,000.00, I can ask for a cash-out, If I am a qualified borrower, of P200,000.00 making my new mortgage to P800,000.00. This type of refinancing are for those who need extra cash for a lower interest rate.

In my case, I am considering the first type, which is the rate and term refinance since I now have extra income to add on the monthly payments to make the payment term shorter from 30years to maybe 15-20 years.

To help me with my decision to do refinancing, I stumbled upon a very useful mortgage calculator. Although it is in pounds, you can just easily use a converter to check the amount on your desired currency. They have 3 types of calculator. You can choose among Mortgage Affordability, Amortisation, Loan Overpayment and Remortgage. 

Here is a sample of a remortgage calculation based on my loan balance and the term - years:

MortgageCalculator.UK/remortgage/?y=15.000&r=3&l=13379.02&hp=13379.02&dp=0.00

What's great about this calculator is that it even have graphs and tables to let you see mortgage reduction over loan term, yearly capital and interest payment breakdown and monthly capital and interest payment breakdown just by entering your loan balance, interest rate and term - years.

But another option that's crossing my mind is to get another loan for another home if there is a great deal that I may find in Lamudi or if there is a foreclosure property from a certain bank that is near our area. 

If you are in my position, would you also consider refinancing? Do you think it is a good or a bad idea and what are the factors that you think should be considered before making this move? Would love to hear your opinions and experiencing with regards to this matter. Comment down below and let's start a conversation.