What does it mean to refinance your mortgage?
When you initially agree to your mortgage, you may find that the terms aren’t as good as you may have hoped. This is especially true for first-time homeowners who are more of a risk to the lender, so they’ll typically have higher interest rates to ensure that the lender recoups on their investment.
Thankfully, you won’t have to endure the terms of the mortgage for the entirety of its duration, and there can come a time when you can rearrange the deal to your benefit. This is especially true if you’ve managed to make all of your payments on time and have been a good client to the lender.
When you refinance your mortgage, you take out a second mortgage so that you can pay off the first one in full. Once this has been paid off, the cost is rolled into your new mortgage, which can feature different terms when compared to the first agreement.
There are a few different reasons why you would want to refinance your mortgage, and everyone has their own benefit to gain from it. Let’s take a look at the top reasons why you would want to consider refinancing your mortgage.
Why you may want to refinance your mortgage in Winnipeg.
The most common reason why homeowners choose to refinance their mortgage is so that they can benefit from better interest rates. Over the years, interest rates have gone lower and lower, and mortgaging is looking like a better option than it was even just a decade ago.
If you have noticed that interest rates have drastically improved in your area, and you want to pay less over time, then refinancing may be a great idea. Keep in mind that you’ll need to have some money up-front so that you can pay the penalties of breaking the agreement.
When you consider refinancing your mortgage, you’ll want to compare the amount of money that you’ll spend on the penalties with the amount that you’ll save in the long run. The majority of the time, you’ll save a lot more money by taking the penalties and refinancing your mortgage at a better rate.
On the other side of the coin, you can also use your refinancing to lock in a low interest rate. If you notice that the market is showing rising interest rates, then you may want to refinance your mortgage so that you can make sure that you lock in a longer term rate right now.
While this is in a category of its own, refinancing is also a key part of consolidating your debt. Debt consolidation allows you to fold a high-interest loan into a low-interest one, like your mortgage. Through refinancing, you can combine these debts and benefit from a lower interest rate.
This is the main benefit of consolidating your debt, as you’ll pay much less in interest over the course of the debt’s existence. Debt consolidation can also allow you to reduce the number of bills that you have to pay each month, making it easier to keep track of your finances.
Finally, refinancing your mortgage will also provide you with access to your home equity, which is the percentage of your home that belongs to you. By accessing this equity, you can take out money against your home so that you can pay for renovations or any other expenses.
As you can see, there are plenty of potential advantages to refinancing your mortgage, and what you get out of it depends on what you’re looking for. If you’re looking to refinance your mortgage in Winnipeg and you don’t know where to start, feel free to get in touch with us and we can discuss your situation and the steps you can take.