Lots of homeowners have heard about mortgage refinancing, and how it
can save them thousands of dollars on their mortgage every year. But if
you’re not careful, or if you do it at the wrong time, mortgage
refinancing might not be the cost-saving option you thought it would
be; and it could even end up costing you money.
Interest rates in Canada are a constantly fluctuating thing, even when they’ve been steady for some time. If the interest rate has risen significantly since you first locked in your mortgage, you’ll actually end up paying more by refinancing your mortgage. And even if it’s only raised by a small one or two percent, the closing costs of mortgage refinancing might strip away any savings you were going to make through the refinance. No one except a mortgage professional can advise you whether or not interest rates have dropped enough for you to save through mortgage refinancing; but you can get an idea yourself by finding out what the difference in the interest rate is, and calculating what the closing costs would be if you were to refinance.
One of the times that it’s most beneficial for homeowners to refinance their mortgage is if they are paying mortgage insurance on their homes. Mortgage insurance is a necessary requirement when the homeowner holds less than 80% equity in their homes, often because they didn’t have enough for the required down payment when they first got their mortgage. This insurance can cost the homeowner thousands of dollars a year; but once the equity climbs above 80%, the homeowner can have it dropped from their mortgage through mortgage refinancing.
One of the most popular times to refinance is when you’re trying to fix bad credit. Instead of using high-interest borrowing methods such as a personal loan or credit cards, borrowing against your equity with mortgage refinancing can be a great way to afford payments, while still rebuilding your credit.
Other than these, there are a number of factors that will have to be taken into consideration with mortgage refinancing. Some of those include whether or not any points have been paid on the new mortgage in order to lower the interest rate; if you need to withdraw cash at the time of equity; and what type of interest rate you get, whether it’s fixed or variable.
It’s true that there are times when mortgage refinancing simply doesn’t make sense and could end up costing the homeowner instead of saving them. But, it’s also true that mortgage refinancing could also take thousands of dollars off mortgage payments every single year. Too often homeowners lock in their mortgage and don’t think about it again until it’s necessary – when it’s time to renew. But looking in on your current mortgage agreement now and then, especially when there’s activity with the interest rate, is a good idea to see if and when mortgage refinancing makes the most sense for you.
Interest rates in Canada are a constantly fluctuating thing, even when they’ve been steady for some time. If the interest rate has risen significantly since you first locked in your mortgage, you’ll actually end up paying more by refinancing your mortgage. And even if it’s only raised by a small one or two percent, the closing costs of mortgage refinancing might strip away any savings you were going to make through the refinance. No one except a mortgage professional can advise you whether or not interest rates have dropped enough for you to save through mortgage refinancing; but you can get an idea yourself by finding out what the difference in the interest rate is, and calculating what the closing costs would be if you were to refinance.
One of the times that it’s most beneficial for homeowners to refinance their mortgage is if they are paying mortgage insurance on their homes. Mortgage insurance is a necessary requirement when the homeowner holds less than 80% equity in their homes, often because they didn’t have enough for the required down payment when they first got their mortgage. This insurance can cost the homeowner thousands of dollars a year; but once the equity climbs above 80%, the homeowner can have it dropped from their mortgage through mortgage refinancing.
One of the most popular times to refinance is when you’re trying to fix bad credit. Instead of using high-interest borrowing methods such as a personal loan or credit cards, borrowing against your equity with mortgage refinancing can be a great way to afford payments, while still rebuilding your credit.
Other than these, there are a number of factors that will have to be taken into consideration with mortgage refinancing. Some of those include whether or not any points have been paid on the new mortgage in order to lower the interest rate; if you need to withdraw cash at the time of equity; and what type of interest rate you get, whether it’s fixed or variable.
It’s true that there are times when mortgage refinancing simply doesn’t make sense and could end up costing the homeowner instead of saving them. But, it’s also true that mortgage refinancing could also take thousands of dollars off mortgage payments every single year. Too often homeowners lock in their mortgage and don’t think about it again until it’s necessary – when it’s time to renew. But looking in on your current mortgage agreement now and then, especially when there’s activity with the interest rate, is a good idea to see if and when mortgage refinancing makes the most sense for you.
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