If you are thinking about refinancing your mortgage, you may be wondering if the timing is right. Perhaps interest rates have dropped since you signed for your original mortgage – on the other hand, maybe you are thinking of holding out until interest rates drop a little more. How do you know when the right time is?
If you are waiting for interest rates to hit their bottom however, that is a game that you are likely to lose. No one can predict exactly when that is going to be.
The bottom line is that the best time to refinance your mortgage is when doing so is going to save you money!
When will refinancing your mortgage save you money?
There are several scenarios in which refinancing your mortgage can save you money. Among the most common are:
- When interest rates have dropped – even a small decrease in your mortgage interest payments can save you thousands of dollars over the time that you pay off your home.
- You qualify for a better type of mortgage – maybe interest rates with the Bank of Canada haven’t changed much, but the interest rates that you qualify for have. For example, if you currently have a bad credit mortgage, but now you qualify for a more traditional mortgage, then refinancing your mortgage may save you a lot of money in interest.
- You are consolidating debt – the other scenario in which refinancing your mortgage can save you money is when you have other higher interest consumer debt. If you have enough equity in your home, you can consolidate your other debts by refinancing your mortgage which can substantially lower how much you will have to pay in interest over time.
Does refinancing your mortgage always save you money?
When you refinance your mortgage, you will have to break your mortgage in order to get a new one. And because you are breaking your mortgage early, there will be a financial penalty to pay. So even if you are saving on interest, it is important to make sure that you are saving money overall. If the penalty for breaking your mortgage is too high, then it won’t be beneficial for you to refinance – even if you are saving on interest.
Typically, the closer you are to your renewal date, the less you will have to pay as a penalty. But if you recently renewed your mortgage, then chances are that it won’t be worth it for you to refinance.
How do I know if refinancing will save me money?
The best way to find out if you can save money – and how much – through refinancing is to meet with your mortgage broker. They have software that will run the calculations for you to determine whether refinancing is a smart choice for you. (And if it’s not, they can show you other options you may not have considered).
Refinancing can be a great financial strategy, but it’s important to work with your mortgage broker to see if it makes sense for you.
Contact Akal Mortgages today
Would you like to learn if the time is right for you to refinance your mortgage? If so, give us a call today.
When we say YES! We stand behind our promise.