Refinancing your home can help you get a lower rate of interest on your mortgage, shorten its term, reduce interest payments, consolidate debt, finance a large purchase or raise fund to cover an unexpected financial emergency, and is when you renegotiate your existing mortgage loan and replace it with a new one.
Helping you to leverage the equity in your home, refinancing your mortgage often gives you saving with a new interest rate that far outweigh the prepayment costs associated with refinancing.
Strategic mortgage refinancing can be a fantastic way of lowering your mortgage payments and helping you to quickly build equity or combat high-interest debt.
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How is Mortgage Renewal Different to Mortgage Refinancing?
The latter can be carried out at any point during your mortgage, while a renewal takes place when your existing term is up for maturity and you need to select a new one. When you choose your new mortgage, you can reset your interest rate, term and amount without incurring a penalty, and if you stay with your current lender, you’ll not require a credit application to renew it.
Enabling you to change the term, interest rate and amount of your existing mortgage, many Canadians refinance to get a lower rate of interest, or to get access to more cash. With a mortgage refinance, a new application is typically required.
The Benefits of Mortgage Refinancing
There are 3 main benefits of refinancing your mortgage, and these are listed below:
Get Access to Cash Through Home Equity
Giving you access to up to 80% of your homes value, you can gain the funds to make renovations or repairs to your home, buy another property, take a vacation, or do pretty much whatever you want with it!
Reduce your Interest Rate
Mortgage brokers usually negotiate with a variety of lenders to get the lowest refinance rates for their clients, and doing so can reduce the cost of borrowing.
Consolidate your Debts
Helping you to lower your monthly payments, pay your debts off sooner and give your credit score a boost, consolidating your high-interest debts can be achieved when you refinance your mortgage.
Is Refinancing your Mortgage better than Getting Other Credit Products?
With typically lower rates when compared to other credit products such as personal lines of credit, credit cards or commercial loans, mortgages can be refinanced to help you fund any number of your goals.
Is There a Good Time to Refinance your Mortgage?
While you can refinance your mortgage whenever you choose, making sure that it’s right for you is crucial. For example, if your mortgage will be paid off in less than a year, refinancing wouldn’t be a smart move, and this is the same if you’re not offered better terms than opting out.
Be warned that refinancing your mortgage before its current term matures, can result in a prepayment penalty, and many Canadians choose to wait until their mortgage is up for renewal to refinance. That said, you could save more with a new, lower interest rate than the penalty will cost, so it still may be a smart move to refinance even if your existing mortgage isn’t due for renewal.