Brampton Mortgage Broker – Rumy Gill

Commercial & Residential Mortgages. “Ready To Fund!”

Brampton Mortgage Broker - Rumy Gill

When Is The Best Time To Refinance Your Mortgage?

Are you thinking about refinancing your mortgage, but are wondering if it is the best time to do so? Well, this is not an easy question to answer, as everyone has their own situation and financial needs. You will need to consider your financial goals and what you want to achieve. If you are struggling with making mortgage payments, it may be time to refinance and get that much needed breathing room. Let’s take a look at what refinancing is, and when refinancing a mortgage is a good plan.

What is refinancing a mortgage? It is when a borrower renegotiates the current mortgage loan contract and selects new terms. You will want to make sure the new loan should have better terms so it improves your overall finances. A refinancing of your mortgage will pay it off and replaces with another loan. The new, refinance mortgage loan will usually have lower rate and monthly loan payments.

What can refinancing a mortgage do?

Refinancing a mortgage can reduce your monthly interest payments, saving on the interest you will pay. A refinanced mortgage can also quickly pay off other loans and consolidate your high interest debts. If you need to, you can use the equity built up in your home to take out money. This helps in the case of sudden needed repairs or renovation, or any other reason you may need the money for. Refinancing a mortgage can save you money, build equity, and pay off your high interest debts and also help with lowering your monthly mortgage payments.

When is the Best Time to Refinance?

Deciding when to refinance a mortgage depends on many things, how long you plan on keeping your home, if you and your home will even qualify for refinancing, and what you will get from refinancing at this time. Refinancing a mortgage is more beneficial when interest rates are low. If you refinance the loan at the right time, you can save on interest rates during the life of the loan since the rates would drop. You can usually lower the rate and shorten the term of the mortgage if you choose allowing you to pay off your mortgage much faster or you can choose to extend the term of you mortgage which will allow you to lower you monthly payments, giving you more flexibility in your monthly cash flow.

A good time to refinance would be when your mortgage has a higher interest rate than those on the market currently. Once you have a mortgage, you typically have to wait until the term is up on your current mortgage so you can refinance without any penalty. However, even by paying out a penalty to refinance early, you can actually benefit you greatly. If by refinancing early allows you to get access to money and help pay off and consolidate high interest debts you have outside of your mortgage such as credit card, car loans, or other debts you can consolidate all these payments into your mortgage and take advantage of a lower interest rate, which can result in overall lower monthly payments for you.

Some people refinance when they have built up equity on their home. Now you might be asking what exactly equity in my home is? Well, equity in your home is the difference between the worth of your home and what is owed to the mortgage lender. For example, your home is worth $700,000 and you owe $400,000 on your mortgage. The equity you have in your home is $300,000. However, it is important to note that when refinancing you will be able to get access up to 80% of the value of your home, so in the above value of $700,000 you will be able to get access to $560,000 for refinancing but since there is a mortgage for $400,000 in place owing on the mortgage, the actual amount you can get from the equity in your home from a refinance for will be $160,000. Don’t worry if this sounds confusing to you, you can always get in touch with us and our Brampton mortgage broker can work out the amount of equity you can access from your home for your particular situation.

Also, if you are looking to change mortgage companies, it may be the right time to refinance your mortgage so you can get the best rate and monthly payments for your mortgage.

Do not try to refinance if you are going to flip the house or plan on moving in the near future. This type of mortgage works well if you plan on staying in the home for at least the length of the mortgage term you have in place, whether it be a one ye, two year or even a five years term. Remember, when opting for a mortgage refinance you want to make sure your credit score and history is excellent standing in order for you to qualify for a refinancing loan. If your credit needs some work, maybe now is not the best time.

Can You save money when you Refinance your Mortgage?

The simple answer is, yes. Here are a few ideas:

  1. Pay the Fees and Lender Costs: do your homework on costs. Sometimes there are costs like private mortgage insurance, legal fees, and closing costs. By paying costs, fees and points, more of your payment can go to the principal reduction per month.
  2. Improve Your Credit Score: How is your credit score? Has your credit score improved since you first got the loan, and how have your savings and income been? If they are strong, the better. While you are in the process of refinancing your mortgage, try not to apply for new credit or open any new accounts. But you will want to check your credit score (using the Equifax websites to view your credit score can help you.) and make sure all is good. If there is something you notice, see if you can fix it or get help.
  3. Be Ready for an Appraisal: Not all mortgages being refinanced need an appraisal, but, an appraisal will help you if your home is worth more than what the lender said it was. When you have an appraisal, simple things like cleaning the interior of the house to make it comfortable and tidy the exterior to make the lawn presentable, helps in the overall presentation of your home.
  4. Make a Plan: Plan what you are going to do with the money you save each month. Be tough and stick to the plan. You don’t spend the savings you accumulate. There is a grace period between the old mortgage payments and the beginning of the new mortgage payments, so take advantage of that by paying off a credit card or renovation cost or any other debts you may have.
  5. Do your Research: Think about the mortgage term. Research what the available terms of a mortgage are, and get one that suits your situation. Take a look at a fixed-rate mortgage, as this type of mortgage will help you work finances and save money.

As with any mortgage, it is a good idea to talk things over with our trusted Brampton mortgage brokers. Everyone has a unique financial situation, and our Brampton mortgage brokers can work with you to find a solution. Ask if refinancing your mortgage now is the right thing to do for you.