Refinancing your mortgage can be a great move. When you refinance your mortgage you can:
- Consolidate your debt at a much lower interest rate
- Access your home’s equity to invest
- Take out cash to renovate or go on vacation
- Take advantage of lower interest rates on the market
- and more
Generally speaking, a mortgage refinance means taking out a new mortgage, possibly with a new lender, and paying off an existing mortgage. Sometimes that means a new amortization, new interest rate, new term length, new features, or all of the above and more.
Use the following six mortgage refinancing tips to make sure that you get the best deal.
Mortgage Tip #1: Compare Rates
Lowering your interest can save you money on the amount of interest you pay over the life of your mortgage and it can also save you monthly cash flow by decreasing your monthly payments.
Compare your existing mortgage rate to rates on the market. If market rates are considerably lower, typically 1% or more, it may be worth your while to look into refinancing.
Mortgage Tip #2: Calculate Costs
There are fees associated with refinancing your mortgage. Make sure you work with a mortgage professional that has your best interests in mind when looking for a deal.
They should walk you through all the costs involved with the refinance including any lender and broker fees, as well as any penalties involved. Depending on whether you are breaking your mortgage or not, penalties can be pretty steep so it may not make sense to refinance until your term is up.
An ethical mortgage broker will tell you to wait until the time is right and make sure the numbers make sense before refinancing your mortgage.
Mortgage Tip #3: ARM vs. Fixed
Thinking about the long game is typically a good idea. Your Adjustable Rate Mortgage may have been a great idea three years ago, but if market conditions have changed and interest rates are going up (hint: it looks like they are), it may be time to lock in your rate with a Fixed Mortgage instead.
Securing a fixed rate while interest rates are still historically low is a good way to protect yourself against upward market adjustments.
Mortgage Tip #4: Mortgage Insurance
For more in depth info on Mortgage Protection Insurance, read this article: Should You Have Mortgage Protection Insurance?
Essentially, Mortgage Protection Insurance is an important component in your family’s security and it adds to the protection you should already have with regular life insurance.
If you don’t already have some sort of insurance for your mortgage, refinancing is a good opportunity to get it.
Mortgage Tip #5: Loan Amortization
It’s pretty common for mortgages in Ontario to have an amortization of 30 years. The length of the amortization of the mortgage is very important, it contributes significantly to the amount of interest you’ll over the life of your mortgage.
Refinancing your mortgage is an opportunity to shorten your amortization to 25 years, 20 years, or even shorter, thereby saving you interest over time.
It’s also a chance to shorten the term of your mortgage, which could net you an even lower interest rate in the process.
Mortgage Tip #6: Debt Consolidation
Accessing the equity in your home is a great way to consolidate and secure your debt, often at much lower interest rates. It’s also an opportunity to eliminate any second or third mortgages you may have on your home and roll them into a single, lower interest payment.
The major consideration with consolidating your unsecured debt with your mortgage refinance is you should set up a support system that prevents you from falling back into bad habits and racking up debt again. This is where Ardent Mortgages can help.
Ardent Mortgages specializes in debt consolidation and mortgage refinancing. We help our clients reestablish their credit, become debt free, and show them how to begin building wealth instead of constantly falling behind when it comes to their finances.
Ready to explore your refinancing options? Click here to schedule your free, no obligation consultation call. We’ll help you understand what options are available to you and walk with you through every step of the refinancing process. Schedule your call today!