What is Refinancing?
Refinancing is a word that essentially refers to rearranging the terms of your mortgage, and there are plenty of reasons why you would want to do so. The most common reason to refinance is because the original terms of your mortgage were unfavorable for one of many reasons, and now you would like better ones.
Keep in mind that there are a few catches when it comes to refinancing, so you’ll want to be sure that you know all of the ins and outs before you commit to doing so. Over the course of this guide, I’ll cover everything that you need to know about refinancing your mortgage in Winnipeg.
First, let’s explain what refinancing is in more technical terms. Since your first mortgage can’t just disappear, you essentially take out a larger mortgage as the second one, and you use the extra money that you get from it so that you can pay off the first mortgage in full. This essentially transfers the existing debt to the second one.
Keep in mind that refinancing your mortgage can help immensely, and I’ll go over all of the ways that could be the case momentarily. You’ll want to make sure that you follow all of the right steps when you refinance, and I can help you with the process, so feel free to contact me for consultation and further help.
Some of the Reasons Why You Should Refinance
The first thing to consider is that refinancing a mortgage may not be worth it for everyone, especially if there isn’t much for you to gain by doing so. However, in some cases, refinancing can save you hundreds or even thousands of dollars over the length of your new mortgage.
If you’ve noticed that interest rates have improved immensely since you signed your first mortgage, then you may want to consider refinancing as an option. This can bring down your interest rates on your new mortgage, resulting in savings for the remainder of your term.
When you refinance your mortgage, you have to pay the penalty for breaking the first one, and this can sometimes exceed the money that you save from better interest rates. The first thing that you should do when considering refinancing is to compare the costs with the money that you’ll gain.
You’ll sometimes find that the expenses outweigh the benefits of refinancing, so you may sometimes want to deal with a worse interest rate. Remember that the end goal is to pay out your mortgage so that you own your home fully, so you’ll want to take the quickest and cheapest route to that result.
Debt consolidation is another extremely common reason for homeowners to refinance their mortgage, as it will allow them to fold together two different debts. When you consolidate debt, you essentially combine two of them so that you can get better terms for one of them.
Debt consolidation is a particularly attractive option when refinancing a mortgage because of the relatively low interest rates involved in the agreement. When you consolidate them with high-interest debt, like credit card bills, then you can save money on the credit cards.
Since the lower interest rate will reduce the speed at which your debt grows, then you’ll be able to pay it off more realistically. Consolidating your debt can also make you feel better about it because it will seem more manageable; instead of three bills arriving every month, you’ll just have one.
I hope that I’ve been able to properly explain mortgage refinancing and the reasons why you may want to do so. If you need any help refinancing your mortgage, feel free to get in contact with me.