Refinancing your mortgage can lower your loan payments and improve finances when you do it right. Our experienced and licensed team of mortgage brokers at Brampton Mortgage Broker has helped many homeowners get the most out of their mortgage refinance but here are a few things our team would like to share with you and what we think you should know when you refinance your mortgage in Brampton.
Refinancing Explained
Refinancing your mortgage is when you renegotiate your current mortgage terms and work on creating new ones. This newly ‘refinanced’ loan actually pays off and gets rid of the first loan, creating a new one. This new loan will have lower monthly loan payments.
Why Should I Refinance my Mortgage?
The reasons to refinance are endless, but you have to make sure they work for you.
- Refinancing a mortgage lowers monthly interest payments. Refinancing also saves on interest.
- Refinancing a mortgage can pay off high-interest loans and consolidate debts into a single, lower payment each month.
- When you are refinancing, you can also use your home’s equity to take out funds. Using equity is helpful when you are faced with some much-needed repairs or tuition fees. Refinancing saves you money, builds equity, and pays off the mortgage quickly.
- Mortgage refinancing at the right time would make the rates drop and will help you save on interest rates during the remaining time on the loan.
- When you want to use equity, refinancing the mortgage can help. Some people plan on refinancing a mortgage when they have built up enough equity on their home to use.
- Some people refinance their mortgage they are planning on changing mortgage companies.
- Refinancing your mortgage can help you reach financial goals. If you are struggling with making mortgage payments, it may be time to refinance so you can reach those goals.
Different Types of Refinancing
When you are refinancing your mortgage in Brampton, there are three regular types of mortgage refinance loans available. Ask your mortgage broker for help if you need anything explained further or if you need more information.
Rate-and-Term Refinance Loan: When you want to change the interest rate, the loan term, or both, and you also want to make changes to the loan amount, you will want to use this type of loan. The Rate and Term Refinance Loan is good if you want to change from a fixed rate to an adjustable rate, so you can save money on monthly payments.
Cash-In Refinance Loan: This Cash-In Refinance loan is not as common as the others but still has a job to do. It’s a good choice when you are struggling with mortgage payments and need a loan. This loan is usually chosen when a homeowner refinances the mortgage loan contract and brings funds in an attempt to reduce the balance on the new mortgage.
Cash-Out Refinance Loan: The cash-out refinance loan will help homeowners take out the funds they need for sudden financial responsibilities. A cash-out loan uses the home’s equity and takes out a certain amount. By doing this, you will get a higher loan amount, usually, the amount you took out makes up the difference. Speak to your mortgage broker if you are interested in a Cash-out Refinance Loan. This type of loan usually results in monthly payments and interest rates being higher than the other loans.
The Method of Refinancing your Mortgage
How do you plan to refinance your mortgage? Perhaps the ideas below will help you as the time to refinance gets closer
- Create a goal: Decide on what you want to do. Whether it is to reduce your monthly payments or shorten the term of your loan, you will need to decide on which one works for you.
- Shop around for the best rates for mortgage refinancing: Shop around for the best rates for you and don’t forget to look at fees, as well.
- When you have a selection of three to five lenders, apply for a mortgage: Within a two-week period, apply and submit all the applications possible. This will have a minimal impact on your credit score.
- Pick a mortgage lender you trust: Each mortgage lender should provide a Loan Estimate once you apply. When you have them all, compare then pick the best offer for you, as the estimates tell you how much you will need for closing costs.
- Lock in the Interest Rate: Locking in your interest rate makes sure your interest rate won’t be changed or altered during a set period of time. You must work with the lender to close the loan before the expiration of the rate lock.
- Close on the loan: This is when you need to pay closing costs. Closing costs are listed in the Loan Estimate and the Closing Disclosure. Closing on a refinance is similar to closing on a purchase loan. Ask your Mortgage Broker if you need further explanation.
Do you Need Another Reason to Refinance?
You can save money while refinancing your mortgage and here are a few tips to help explain and guide you:
- Pay Lender Costs – By paying costs and points, you can put more of your payment towards the principal reduction per month.
- You can Improve your Credit Score – You can improve your credit score in the time since you first got the loan. While you are refinancing your mortgage, stay away from using credit cards or opening new accounts.
- Prepare for an Appraisal – Although it is not always necessary for refinancing mortgages, an appraisal helps if the home is worth more than what the lender said it was.
- Have a plan for what you are going to do with the savings each month.
- Consider the Term of the Mortgage – do your research on the available terms of a mortgage, and find a term that works for you.
As you can see, there are different types of mortgages to choose from and a method for refinancing your mortgage. If you are still wondering if these are enough reasons to refinance your mortgage, our Brampton Mortgage Broker team can give you expert advice. Let our experienced and licensed team of mortgage brokers at Brampton Mortgage Broker discuss options for refinancing the mortgage that will work best for you, today.