Refinancing your home mortgage is a strategy you may have heard your mortgage broker talk about before. But what does that mean exactly and is it a good idea for you?
What is a mortgage refinance?
Mortgage refinancing simply means breaking your current mortgage in order to get a new one. Sometimes people do this to get a lower interest rate and sometimes they refinance in order to use their home equity to consolidate debt.
So how do you know if refinancing your home mortgage is a good idea for you? Here are a few questions to consider:
How much will you save with lowered interest rates?
At the time of writing this, mortgage rates for traditional mortgages are pretty low and aren’t expected to go much lower. But if you have a specialized mortgage such as a bad credit mortgage or a private mortgage, your rates are quite a bit higher. Have you improved your credit to the point where you qualify for a traditional mortgage? Refinancing could help you save quite a bit in interest.
Do you need to consolidate debt?
A popular reason for mortgage refinancing is to consolidate debt. If you have high interest debts such as credit cards, then consolidating those debts through refinancing may be able help you lower your debt payments and get out of debt faster.
How much is the financial penalty?
Since refinancing requires you to break your current mortgage, there will most likely be a financial penalty. And the further away from your mortgage renewal date that you are, the higher that penalty is going to be. Before you refinance, you need to figure out whether the money you save in interest will be enough to offset the penalty.
Can you commit to the payments?
Especially if you are using your mortgage refinance to consolidate debt, you need to consider carefully whether you will be able to make the minimum payments. Since your debt is secured using your home equity, you’ll be risking your home if you cannot make the payments.
Contact Akal Mortgages today!
Refinancing your mortgage can be a great financial strategy for certain people in certain financial situations. If you would like to know if it is the right choice for you, contact Akal Mortgages today. One of our professional mortgage brokers can perform some calculations to help determine if this is a good strategy for you or if there are other mortgage strategies that make more sense for your situation.
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