There has been a flurry of refinance activity this year given our rock-bottom interest rates, providing homeowners with access to today’s low rates and the most cost-effective way to get needed funds. Refinancing means getting out of your current mortgage and replacing it with a new one. A minimum of 20% home equity is required to complete a refinance.
There are several compelling reasons why homeowners refinance their mortgage:
- To get a lower interest rate. Refinancing to get a lower rate makes sense if the savings you achieve with the lower rate are greater than the cost of getting out of your existing mortgage.
- A much-needed financial reset. Debt restructuring is one of the primary reasons homeowners refinance. If you have too much high-interest debt that is eating your monthly cash flow, you may be able to get the breathing room you need by rolling that debt into a new low-interest mortgage. You’ll get one manageable monthly payment, immediate cash-flow relief, and long-term interest savings. It is also a great way to improve and protect your credit score.
- Renovate. Homeowners are renovating to adapt to their new covid lifestyles; whether it’s to improve the quality of their lives, or for functionality like a new home office. At the same time, your renovations can increase the value of your home, a nice added benefit.
- Invest in the future. If you’ve found the perfect cottage or the retirement home of your dreams, refinancing may be the way to make that purchase happen if you’re not quite ready to sell your primary residence. Or perhaps you are thinking rental property for a long-term wealth building opportunity and a source of retirement income.
- You need funds. You may be able to get the funds you need for major expenses, like a new business, tuition, or wedding, often a better strategy than loading it all onto high-interest credit cards or unsecured line of credit.
Since breaking your current mortgage comes with a fee, I would be happy to complete a personalized cost/benefit analysis so you can determine whether refinancing makes sense. The fee to break your mortgage depends on several factors so it’s best to get in touch to discuss. It is not expected that rates will go much lower so there may not be any benefit to waiting to see if you can get a better deal later.
Source: Sean Rankin, Mortgage Agent with Smart Debt Mortgages
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