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 cities like Calgary, Toronto and Vancouver, many 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 comes up for renewal? That’s why most homeowners choose the safety and security of a five-year fixed rate mortgage. Although you’re protected, if you lock-in you could find yourself paying a lot more than the going rate.
Before you refinance your mortgage, it’s important to make sure it’s worth your while. With a closed mortgage, you’ll have to cough up mortgage penalties to your bank to escape the shackles of your existing mortgage. It’s important to do the math and make sure your savings outweigh the penalties you’ll incur. If you’re not a math whiz, no need to panic – Calum Ross can help you crunch the numbers and see if breaking your mortgage is a smart move.
2. Tap into Your Home’s Equity
Whether you’re looking to add a second storey on your bungalow for your growing family or you need help funding your retirement, refinancing your mortgage may be your golden ticket. By refinancing your mortgage, you can borrow up to 60 percent of your home’s value. Best of all, you can do it without selling your beloved 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 the 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, a 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 multiple statements.
Not only is a consolidated loan more convenient, it can 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 refinancing makes sense for you.