3 Reason You Should Consider Refinancing
A lot of people view their mortgage as a life sentence when they sign on the dotted line. Just because you signed a five-year mortgage term, doesn’t mean you can’t see what else is out there. Whether you’re borrowing money for that walkout patio you’ve always dreamed of or you’d like to invest in a rental property, refinancing your mortgage may be the answer. With home prices shattering the stratosphere in many cities, homeowners find themselves “house rich, cash poor.” By refinancing your mortgage, you can unlock some of that valuable equity and put it to work. Here are three reasons you should consider refinancing your mortgage.
1. Low Mortgage Rates
When it comes to mortgages, security comes at a cost. Interest rates may be low now, but who’s to say they’ll be this low in five years when your mortgage is up for renewal? This is why many homeowners choose the safety and security of a fixed rate mortgage. Although you’re protected if you lock-in you could find yourself paying a lot more than the going rate, especially if there is a new heating unit in the home.
Before you refinance, it’s important to know it’s worth your while. With a closed term mortgage, you’ll have to cough up mortgage penalties to your bank to escape the shackles of your existing mortgage. It’s important to calculate what your savings outweigh the penalties you’ll incur. If you’re not a math whiz, no need to panic – Eva Neufeld can help you run the numbers and see if breaking your mortgage is the right move for you.
2. Tap into Your Home’s Equity
Whether you’re looking to add a second story on your bungalow for your growing family or you need some extra money to fund your retirement, refinancing your mortgage may be your ticket. By refinancing your mortgage, you can borrow up to 65 percent of your home’s value. Best of all, you can do it without selling your home.
When you take out a Home Equity Line of Credit – or HELOC for short – or you “blend and extend” your mortgage, you can take advantage of interest rates as low as prime plus 0.5 percent. With interest rates today near a record low, there’s never been a better time to invest!
3. Consolidating Your Debt
Are you drowning under a mountain of debt? Are you struggling to pay those high interest credit card bills? Consolidating your debt may be the answer. As mentioned above, your mortgage is one of the cheapest forms of debt out there. If you have high-interest consumer debt like credit card interest, car loan or the dreaded payday loan, refinancing your mortgage is a no-brainer.
When you consolidate your debt, you get the best of both worlds. Here’s how it works: your mortgage lender will pay off your existing debts. After that you’ll only have one monthly payment to make; you won’t have to deal with the hassle of trying to manage multiple statements.
Not only is a consolidated loan more convenient, but it can also save you mega bucks! The interest rates on some store credit cards are highway robbery at near 30 percent! With a consolidated loan, more money will go towards principal and less towards interest, so you’ll be debt-free sooner.
The decision to refinance your mortgage can be overwhelming, so it’s important to sit down with your mortgage broker. By looking at all your options, you can decide whether financing makes sense for you.