Refinancing your mortgage can be a great way to take advantage of lower interest rates, consolidate debt and save money. But it can also cost you money if you do it in the wrong way or with the wrong lender. Before refinancing, it is always best to sit down with a professional mortgage broker to get their expert advice.
Here are five things you should know before you refinance.
1. Refinancing can help you save money with lower interest rates.
The number one reason why so many Canadians choose to refinance their homes is that they can take advantage of lower interest rates. This may be because mortgage rates have dropped since they first took out their mortgage or it may be because they have high interest debt that can be consolidated. Through refinancing, it is often possible to save thousands of dollars per year.
2. You can extend or reduce your amortization period when you refinance
If you have had a change in your income either for better or worse, refinancing can help you change the amortization period of your mortgage. If you are making less money, you can lower you payments by extending your amortization or if you are earning more, you can pay off your mortgage faster by reducing it.
3. There are penalties for refinancing
In order to refinance your mortgage, you must first break your current mortgage – and that means you’re going to have to pay a penalty. Your mortgage broker can help you determine whether the amount you can save through the refinance will be worth the financial penalty.
4. Your credit will play an important role
Whether you have good or poor credit is going to play an important role in your refinancing. If you do not have very good credit, then getting refinancing through a traditional lender might not be possible. The same is true if you have lost your job or if you are self-employed and can’t verify your income.
Fortunately, there are reputable alternative lenders out there who specialize in these types of loans. A professional mortgage broker will be able to lead you to the lenders that are the best fit for you.
5. Shopping around is key
Even if you are able to get refinancing through your current lender, you will likely not get the best rate unless you shop around. Working with a mortgage broker is important because they already have contacts with multiple lenders and can do the shopping for you. Their contacts include alternative lenders who specialize in helping those with poor credit and those who are self-employed.
If you require more help in determining whether refinancing is right for you, call the team at Akal Mortgages today at (416)-621-1300.
When we say Yes! We stand behind our promise.®™