HOME ADVICE
When Should You Consider Refinancing Your Home?
You’ve likely heard that refinancing your mortgage can be an important strategy when looking to improve cash flow, but what does that mean, and when is refinancing a good idea? Refinancing essentially means replacing an existing mortgage with a new one, and many homeowners choose this path for a variety of important reasons. Often, the mortgage holder is looking to take advantage of a lower rate or change the mortgage term, amortization period or amount. The reason depends on both the personal and financial situation the homeowners are in - which may have changed since the time their current mortgage was acquired - and there are certainly a number of situations when refinancing is a great option.
Top Reasons Many Homeowners Choose to Refinance Their Home:
1. To Improve Cash Flow: To take advantage of lower monthly mortgage payments or extend the amortization period to create more room in the household budget, refinancing may be a great path to take. Remember that lowering monthly payments can often mean paying more interest over the life of the mortgage, but for the purpose of freeing up cash flow currently, this may be an important consideration.
2. To Access Their Home’s Equity: Some homeowners choose to borrow against the equity they’ve built. Common examples of this are accessing equity to fund home renovations, cover education expenses or make a major purchase (such as another property).
3. To Change Their Mortgage Features: If the features of your current mortgage are no longer working for you, refinancing can allow an arrangement that works better for your lifestyle now. This may include switching from a variable to fixed mortgage type (which can be favourable due to market conditions), changing the payment frequency, adding prepayment privileges, or adjusting other mortgage terms to better suit your current circumstances.
4. Debt Consolidation: Home financing for the purpose of debt consolidation generally means taking out a new, larger loan to replace the current one, and using the difference (your home equity) to pay off high-interest, unsecured debts if the mortgage rate is less than the interest rate associated with those loans. In a situation such as this, it is important to work closely with an advisor to ensure this is the right plan of action.
5. Major Life Changes or To Invest in Other Financial Goals: Life can change quickly, and sometimes homeowners find themselves in a very different situation than they were in when their current mortgage was negotiated. Divorce, career changes or new financial goals are examples of situations that could require changes to your current mortgage arrangement.
Keep in mind that refinancing is not always the best option, and working with an advisor is key. Tandia’s mortgage experts can work with you to complete a mortgage review and discuss your goals to help determine if refinancing is the right move for you. Refinancing would not be advised if the penalties and costs associated with breaking your current mortgage contract outweigh the potential savings.
To find out if mortgage refinancing is something you should consider, get in touch with Tandia today. We’ll help you weigh your options and move forward with confidence.
