Homeowners may have a number of good reasons for wanting to refinance their home, such as gaining access to the equity or getting a lower interest rate. Depending on your personal goals, there are many benefits you can gain from refinancing your mortgage.
What is mortgage refinancing?
When you refinance your mortgage, you are paying off your current lender and taking out a new mortgage. There are a variety of mortgage options available, which means you can get new terms and conditions for your mortgage.
5 Benefits of Refinancing Your Mortgage
Here are some of the biggest advantages of refinancing your mortgage:
Lower mortgage rate – More than lowering your monthly payments, if you are able to get a lower mortgage rate, you could save thousands of dollars over the life of your loan. However, you need to be aware of any prepayment penalties you’ll face if you are breaking your mortgage before the end of your term. In some cases, these may be higher than the money you’ll save from a lower rate.
Use your equity – If you have a substantial amount of equity built up in your home, a refinance can help you gain access to that money. This can come in handy if you’re doing renovations, need to pay off some debt or even help your child pay for college.
Lower monthly payments – Extending the life of your mortgage can help reduce the monthly payments you make. If you’ve been particularly hard-hit during the pandemic, refinancing can help you live on a tighter budget.
Consolidate debt – Refinancing your mortgage gives you the option to roll your debt into the mortgage. Because some loan and credit card rates can be high, refinancing can help you save money over time.
Lock in a lower interest rate – Opting to refinance for a lower rate means you can lock that rate in for the next five years. As the economy recovers from the pandemic, you’ll appreciate the stability that comes with a reduced mortgage rate.
Drawbacks of refinancing
There are many benefits of refinancing but depending on your circumstances, there may also be some disadvantages, such as:
Prepayment fees – If you break your mortgage term before it is up, it will cost you. Sometimes these fees are pretty high. You may want to wait a while longer and refinance at a better time.
Extra costs – The process of refinancing is just the same as when you took out your first mortgage. There are going to be some extra costs involved, including closing costs, mortgage discharge fee, mortgage registration fee and legal fees.
Qualification hurdles – To refinance your mortgage, you’ll have to jump all the mortgage qualification hurdles again. And, if you had a rough financial year, there is a risk you may not be eligible for the lower interest rate.
If you are interested in learning more about mortgage refinancing in Ontario, then call Northwood Mortgage™ at 888-495-4825 or contact us here.