Why (And When) Should You Refinance Your Mortgage?
Paying off your mortgage can seem like a far off destination, but some things can help get you there faster. While not the answer in all situations, refinancing your mortgage could save you money and help in the long run.
Why should you refinance?
The reasons to refinance vary. For one, you could shorten the duration of the mortgage1, potentially even in half, allowing you to pay less in interest, therefore leaving you with more money!
You may also want to refinance your mortgage to convert from an adjustable to a fixed-rate mortgage, which could result in a lower interest rate and eliminate the concern of potential interest rate increases. Conversely, switching from a fixed to an adjustable rate may be a smart move if interest rates are falling as the adjustments result in decreasing rates and smaller payments. You may also want to switch to an adjustable-rate mortgage if you have no intention of staying in your home for more than a couple years, as you won’t have to worry about the potential of higher interest rates in the future.1
Refinancing your mortgage could also tap into home equity to help finance a larger purchase, or to consolidate your debt so you are only paying off one loan. When you roll your existing debt into a single low interest loan, your life greatly improves.
When should you refinance?
It goes without saying that the best time to refinance is when interest rates have dropped, so you can shorten the duration of your mortgage, allowing you to pay less in interest and increase the rate of equity building.1 If your home has increased in value, you may be able to refinance for more than the balance of your mortgage.
Another good time to refinance is if your credit has improved, as credit score is a major factor in determining your mortgage rate.2
Know if it’s right for you
Sometimes refinancing your mortgage can cost you. Before you refinance you’ll need to be sure that the savings you’ll gain will trump any penalties that come from breaking an existing mortgage. A good mortgage broker can easily give you the answers you seek, finding you the best rate and lender for your situation. Give us a call at 613-563-3447 to get started, or use our contact form: https://mortgagesmadeeasy.com/contact/contact-us-form
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1 Investopedia
2 Creditkarma
Sources
Bhatia, Mika. “When Is Refinancing a Mortgage Worth It?” Credit Karma. Retrieved from www.creditkarma.com/home-loans/i/when-is-refinancing-mortgage-worth-it/.
Investopedia Staff. “When (and When Not) to Refinance Your Mortgage.” Investopedia. Retrieved from https://www.investopedia.com/mortgage/refinance/when-and-when-not-to-refinance-mortgage/
