What Homeowners Should Know About Refinancing Their Mortgage
When a homeowner refinances their mortgage, they replace their existing mortgage with a new one, giving them the freedom to take a large mortgage on a home or potentially qualify for a lower interest rate. If a homeowner has good credit, they may be able to turn a variable loan into a fixed loan which can help to lower interests rates.
Homeowners may want to consider refinancing their mortgage if they want to convert between an adjustable-rate and fixed-rate mortgage, shorten the length of the loan’s term, are considering using the equity of their home to finance a large purchase, or if interest rates have dropped since signing a mortgage. That being said, homeowners should always speak with a mortgage agent who can give them the best advice for their situation. Our Mortgage consultations are free and there is no obligation whatsoever.
How to Qualify for Mortgage Refinancing
One factor that lenders and banks look at when determining whether or not the borrower qualifies for a refinance is their loan-to-value ratio. This is done by dividing what is owed on a mortgage and any other debts which have been secured by the property into the current total value of the property. If the result is less than 85%, a homeowner is more likely to qualify for a refinance’.
Lenders may also look at the borrower’s monthly income, debt payments, mortgage statements, T4 slips, property tax bills, asset statements for RRSPs, savings accounts, and investments when deciding whether or not to lend money to the borrower.
What Are the Benefits of Mortgage Refinancing?
There are many reasons why refinancing your mortgage can be beneficial, some include:
- Lower interest rates
- Shortened length of mortgage
- Ability to turn a variable-rate mortgage into a fixed-rate mortgage
- Debt consolidation
- Tap into home equity for large purchases
Although there are benefits of mortgage refinancing, every situation is unique, and some homeowners may not benefit from mortgage refinancing. This is why it is beneficial for a homeowner to speak to a mortgage agent first to find out if a refinance will benefit them and if there are any risks or costs involved.
Home Equity Lines of Credit
If a homeowner wants to tap into their home’s equity for large purchases like home renovations or college tuition, they can refinance their mortgage and may be able to access up to 85% of the value of their home, but this depends on the borrower’s credit as well as other factors. This can be a good financial move if it helps reduce a homeowner’s mortgage payments, shortens the length of the term, or helps build equity in their home. It is also a better and cheaper solution than continuing to rack up high interest credit card debt.
It is imperative that homeowners speak with a licensed mortgage agent before making the decision to refinance their mortgage. This includes taking into consideration how much money they will be saving, spending as well as how long they plan on staying in their home.
Contact us Today
Are you considering refinancing your mortgage? If you’re interested in learning more about mortgage refinancing, contact us today. Our Mortgage consultations are free and there is no obligation whatsoever. Our mortgage agents can save a lot of time and hassle and can shop and negotiate with lenders for you.