Refinancing: Is it right for you?
Refinancing is when you renegotiate your existing mortgage loan agreement, usually to access the equity in your home, or to lower other borrowing costs by taking advantage of a lower interest rate. Refinancing is a great option for those looking for simple ways to consolidate debt or pay for other large ticket items, such as a child’s post-secondary education or maybe home renovations. When you refinance, you select new terms for your mortgage loan agreement, either with the same lender or a new lender altogether. It’s important to keep in mind that there may be penalties for re-financing before the maturity date on your current mortgage. These are all things that your broker will help you consider.
Some common reasons clients consider refinancing their mortgage:
- Debt consolidation. Clients may want to make one debt payment a month, often at a lower rate. The most common is consolidating credit card debt into the mortgage to make those payments more manageable and lessen the impact of interest charges.
- Home renovations. Get the money you need to renovate or make repairs.
- Tuition. Cover education costs for yourself or someone else.
- Investing. Take advantage of an investing opportunity (speak to your tax advisor first).
Is refinancing right for me? Here are some questions that MyQ will help you answer.
Q. Can I refinance if my credit score is low?
A. A bad credit score will definitely impact the approval process, especially when trying to consolidate other debt. Take time to think about why you are looking to refinance and work on improving your credit score before you need to refinance.
Q. Will the lender require a home inspection to refinance?
A.In some instances a home inspection is required for approval on refinancing to ensure the stated value of your home is accurate. This depends on your lender and is something that can be discussed and negotiated.
MyQuick Tip Plan ahead as much as possible to avoid penalties. If you are thinking you might need access to the equity in your home for an upcoming event, let’s think about shortening your term up front. The more you share with your broker up front, the more they can help you make informed decisions that could save you money and headaches further down the line.