Do you want to refinance a mortgage? In many cases, refinancing makes more financial sense than simply extending it for a longer period of time. By refinancing, the borrower effectively takes out a new debt to consolidate an existing one. It results in a shorter duration/ amortization, lower interest rate, ability to raise the loan amount and withdraw additional funds from the borrower’s home equity.
Refinancing is often done to convert an adjustable-rate mortgage to a fixed rate mortgage or vice versa. Thus, switching between the two is a choice to be made depending on your outlook of where rates will go over the next few years.
The ideal time to refinance is in following situations:
- Reduced Interest Rates
Interest rates are dependent on prime rates set by the country’s federal banks. Depending on economic conditions and outlooks, these federal banks may raise or lower the prime rate. If you took out a loan at a higher interest rate, you can refinance it to take advantage of the reduced rate, saving you a few thousand dollars in interest.
- Switching Rate Types
Refinancing can also be used to swap between adjustable and fixed rates. All other things being equal, adjustable-rate mortgages often begin with lower rates than fixed rate mortgages.
- Tapping Into Home Equity
Home equity is defined as the market worth of a home minus the amount of mortgage debt that remains to be paid down. As a debt is paid down, the borrower’s equity in their home grows. A home equity loan is essentially a second mortgage for your home. In this situation, you keep your mortgage and take out a new loan using the equity in your property as collateral. This is available as a lump sum or as a home equity line of credit (HELOC).
- Debt Consolidation
In our daily lives, we incur many debts. The most popular one is credit card debt, which may attract up to 23% interest or even higher. Another frequent type of debt is student debt, which is often incurred at a higher rate than a mortgage. For debts like these, debt consolidation can be extremely beneficial. The process involves taking out a fresh loan to pay off all of the debt. The borrower then pays back the interest at a lower rate.
So, these were some situations where mortgage refinancing in Abbotsford the right choice for you. If you are looking for reliable mortgage brokers who can assist you with refinancing an existing mortgage, rely on none other than Sandhu & Sran Mortgages. For more details, give us a call today.