Learn About Refinancing
Canadians today face many reasons to refinance their mortgage. For example, you may have been working at improving your credit score and now qualify for a new mortgage with a better discount, or you may want to stabilize your payments by changing from a variable rate mortgage to a fixed-rate. Refinancing is also a good option to pull out equity for consolidating debt, home improvements, investments, college expenses, and more.
Don’t let refinancing spook you! Here’s how to make sure you’ll actually save money.
Mortgage rates have fallen a lot in the past while and are significantly lower than just a few years ago. If you have a fixed-rate mortgage or your adjustable rate mortgage has reset to a higher rate, refinancing could save you a bundle. Not only would a lower interest rate mean lower payments, the total cost of your loan would also be less.
But before you take the plunge, think about how long you plan to stay in your home and how much the refinance is going to cost. If you’re not careful, refinancing could actually end up costing more than it saves!
Remember, refinancing a mortgage is a labour-intensive process. It involves loan officers, underwriters, servicing people, appraisers, legal services—and they all charge a fee. Let’s say you can refinance at a 1% lower rate, which decreases your monthly payment by $100. But let’s also assume your closing costs on the refinance are $3,000, which means it’ll take 30 months to cover your costs. That’s why it’s important to know how long you plan to live there. If you end up moving in a couple of years, you’ll actually lose money!
Of course, if you have excellent credit and a pristine payment history, you may be offered a “no-fee” refinance, which makes the decision easy, right? Not always! Refinancing still costs the bank the same amount of money, so chances are they’re burying their fees somewhere in the deal—likely in the form of a higher interest rate!
To find out if refinancing makes sense for you, give me a call. As your local refinance expert, I can analyze your situation, review your current mortgage and outline all the costs and benefits. By accessing specialized lenders with highly competitive rates, I can help you come out ahead on your refinance!
