Refinancing your mortgage can be a smart financial move if done at the right time and in the right way. The process involves replacing your existing mortgage with a new one, often with a different lender.
Allison Cosgrove, the Blue Jean Mortgage Queen providing solutions and results for homebuyers in Mississauga, the GTA, and Golden Horseshoe areas, shares some key insights to help you understand when and how to refinance your mortgage.
- Lower Interest Rates: If you can secure a mortgage rate that is at least 1% lower than your current rate, refinancing can be beneficial. This can significantly reduce your monthly payments and the total amount of interest you'll pay over the life of the loan.
- Change in Financial Situation: If your income has increased or you've inherited a lump sum of money, you could consider refinancing your mortgage to shorten its term. This will allow you to pay off your mortgage sooner and save on interest payments.
- High Home Equity: If you've built significant equity in your home, you may want to tap into it by refinancing your mortgage. This could help fund major expenses like home renovations, education costs, or even investments.
- Debt Consolidation: If you have high-interest debt such as credit card debt, you could consolidate this into your mortgage through refinancing. This could result in a lower overall interest rate and monthly payment. With today’s high cost of living, tight cash flows, and increasing inflation, this option is an attractive – and effective – one for many families.
- Change in Loan Terms: If you want to switch from a variable-rate mortgage to a fixed-rate mortgage (or vice versa), refinancing could be a good option.
However, it's important to note that refinancing doesn't always make financial sense, especially if you plan to move within a few years or have damaged credit. Refinancing could assist in helping to rebuild your credit through freeing up cash and applying it strategically within your budget. Your financial advisor or mortgage broker can show you scenarios of how this can work for your situation.
- Review Your Financial Situation: Examine your current mortgage, credit score, home equity, and financial goals.
- Shop Around for Rates: Contact several lenders to get the best possible rate. A mortgage broker is the ideal professional to help you with this.
Allison concludes, “It is important to consult a mortgage broker before making any steps to refinance. Mortgage brokers have access to a wide variety of solutions and will also offer helpful advice and guidance.”
This article was sponsored by Allison Cosgrove Mortgage Broker Mortgage Architects, a 2023 BurlingtonToday Reader Favourite.
