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Refinancing your mortgage is a smart idea for homeowners who have lowered their interest rate and/or want a lower mortgage. However, refinancing mortgages can also have its downfalls. If your current mortgage is high, it may make sense to refinance, but it can cost you in other ways.
If you already have an existing mortgage, you’re going to have to use the HELOC in a different way. The loan is now unsecured which means you will have to put down cash. You can find more information here on the pros and cons of refinancing your mortgage.
What are the reasons to refinance your mortgage?
More Savings – Refinancing can be a good way to keep more money in your pocket every month. Some of the ways that you can save money are: Refinance your loan to a lower rate Swap a fixed-rate mortgage for a variable rate mortgage. Swap a fixed-rate mortgage with a balloon-adjustable-rate mortgage Lower your interest rate for a larger principal amount Eliminate your PMI Reduce your mortgage payments Increase your home’s equity.
Refinancing to a better loan for your home Do you qualify for a better rate on your mortgage? You might qualify for a better loan in certain circumstances. Qualifying for a better loan on your home involves refinancing in certain circumstances.
What are the disadvantages of refinancing?
Lenders want to see that you’re serious about staying in your home and that you plan on sticking around for a while. In order to get a mortgage loan, a borrower needs to: Start out with 20% of the home’s value. Have enough income to make payments. And they can typically just change their rate/term. Some of the biggest challenges with refinancing are: The smaller the amount of equity you have, the lower your rate will be You’ll have to refinance every year and so this will cause annual payment increases. Refinancing will have a negative impact on your credit score Remortgage fees can be hefty. Taking on debt at a higher rate is going to have a negative impact on your credit score.
How do you know if refinancing is right for you?
Here are some of the first questions you need to answer before refinancing your mortgage: Do you plan on buying a new home in the near future? If so, do you plan on moving within the same state? If not, it might be a good idea to stay with your current lender. If you are going to move, you may want to refinance to prevent paying out closing costs on two mortgages Do you plan on buying a new home in the near future? If so, do you plan on moving within the same state? If not, it might be a good idea to stay with your current lender. If you are going to move, you may want to refinance to prevent paying out closing costs on two mortgages Can you afford to make a large payment on your loan every month?
Read More: What’s the Right Time to Refinance Mortgage?
Refinancing your mortgage is a great way to lower your monthly payments, get access to lower interest rates, and/or extend the term of your loan. There are a number of methods and considerations that you need to take into account before refinancing.