Mortgage Refinancing: 3 Reasons Why You Should Refinance
Refinancing your mortgage can help obtain better interest terms and rates. In this article, we’ll discuss several reasons why you should refinance your mortgage, including: to take advantage of low interest rates, to consolidate debt, and to tap your home equity.
Below are some 3 reasons why you should refinance your mortgages:
To Take Advantage of Low Interest Rates
Don’t let penalties deter you; first, know the numbers. Breaking your contract for a lower interest rate can save you money over time, depending on the penalty and the size of your outstanding mortgage. If you hold a variable rate mortgage, then expect to pay a penalty of three months interest, and if you hold a fixed rate mortgage, then you will pay the greater of three months interest or interest rate differential penalty (IRD). Source: Ratehub.ca
To Consolidate Debt
Most unsecured debt will be priced by your bank at a higher rate than your existing mortgage, in order to compensate them for the higher risk of default. For many, the only solution is to use available equity from their homes to pay out this debt, as it will assist in reducing the overall interest costs, and improve cash flow. If you add the existing mortgage and the overall debt obligation that is to be refinanced, and it turns out to be less than 80% of the fair market value of your home, and you qualify in terms of income and credit scoring, then refinancing into a new first mortgage should be a very straight forward. If any of these components are missing, the refinance could very well make sense, but we would need to look at the overall cost benefit analysis before moving forward. Source: SafeBridgeFinancial.com
To Tap Your Home Equity
With home prices skyrocketing, there’s never been a better time to tap into the equity in your home. Whether you’re looking to build that gazebo you’ve always wanted, go on a dream vacation, or help fund your retirement, refinancing your mortgage can be your golden ticket. If you take out an unsecured line of credit, loan, or charge it on your credit card, it can end up being costly. If you find yourself house rich, cash poor, refinancing your mortgage will let you have your cake and eat it, too. You can hold onto your house and borrow money at ridiculously low interest rates. Source: CALUMROSS.com
If you want to learn more about refinancing your mortgages, please give us a call.