As the summer comes to an end, many of us start looking into the future months ahead. We start to realize that Christmas is just around the corner. For some, this is exciting. However, for those who are struggling with debt, it can be an overwhelming topic to think about. High interest credit cards, car payments, and other forms of debt combined with our everyday living expenses can leave us feeling helpless at times. Refinancing your mortgage can be an option to help create some breathing room. It might even remove some of that Christmas planning anxiety. So what does refinancing your mortgage typically look like?
What is refinancing?
In simple terms, refinancing entails replacing your current mortgage with a new mortgage. This new mortgage usually has different terms than the original mortgage. If the interest rate on the new mortgage is noticeably less than the existing mortgage, the homeowner can save significant money. This can also lead to a lower monthly mortgage payment. A savvy homeowner is constantly searching for new ways to reduce their debt. There are multiple reasons why a homeowner might refinance, including to:
- Obtain a lower interest rate
- Shorten the amortization of their current mortgage
- Switch from an adjustable-rate mortgage to a fixed-rate mortgage
- Consolidate debt
- Home improvements
However, it’s important to keep in mind that there are costs associated with refinancing the original mortgage. You may require an appraisal, title search/legal fees, as well as a penalty to end your existing mortgage contract early. It’s a good idea to speak with your mortgage broker to confirm the costs before making the decision to move forward.
Am I eligible to refinance my mortgage?
The process to refinance is similar to when you were applying for your original mortgage. You need to prove your creditworthiness to qualify for refinancing your mortgage. Having a steady income and established equity in your home are large factors in your eligibility. You can learn more about the ratios used to measure your ability to meet all of your financial obligations in my recent blog on income debt services. If you check off all these boxes, you’re likely eligible to refinance your mortgage!
The bottom line
Refinancing can be a wise financial move if it reduces your mortgage payment, shortens the amortization of your mortgage, or helps you build equity at a faster rate. While it might not be for everyone, if you meet the qualifications it can be a valuable tool to gain control of your debt, and create some much needed financial breathing room. It’s also important to consider how long you plan on living in your current house and how much money you can save through refinancing.
You should always talk to a mortgage broker when considering refinancing your mortgage. Mortgage brokers are able to see your financial picture in its entirety. An unbiased mortgage professional can recommend the best course of action while keeping your long term interests at heart. There are plenty of reasons for refinancing, with getting debt under control being one of the most common.
If you’ve been considering refinancing your mortgage, give me a call at (705) 333-4338 or get in touch with me here!