What You Have to Know About Refinancing Your Mortgage

Refinancing your mortgage is a major financial decision that is best made when you fully understand what you are getting yourself into. Know that although mortgage refinancing is quite common, the outcome and benefits will not be the same for everyone because of various factor that have to be considered. Below are some of the most important things you have to know before refinancing your mortgage.

What is Mortgage Refinancing?

Mortgage refinancing means getting a new loan on a home with a new set of terms. Most people choose a mortgage refinance to get a better interest rate or to change a loan’s length of payment in order to save money. Some choose refinancing to free up some cash that can be funneled elsewhere.

What You Have to Know About Refinancing Your Mortgage

Refinancing to a shorter term will mean getting done with a loan sooner although doing so will result in higher monthly payments. A shorter term also means paying less interest overall, thus saving money. Some homeowners may choose to refinance to a longer-term loan to have lower monthly payments which will allow them to allocate the money to other necessities or financial projects.

Mortgage refinancing is a decision that should not be made lightly. It is meant to improve your current financial situation and help you plan for the long-term. You need to consider your current home’s value, your current mortgage size, the terms of the new mortgage that you’re taking out, your current interest rate, the possible new interest rate, and closing costs plus fees. You have to make sure that any fees you pay will not cost you more in terms of long-term benefits.

When to Refinance?

Your credit score as well as other factors may have changed a lot since the time you first took out a mortgage. This means that you may now be eligible for better interest rates which can save you quite a sizable sum over the remaining years of payment. Aside from wanting to change the length of your mortgage to save money, you may also want to refinance to switch to a fixed-rate mortgage from an adjustable-rate mortgage which will then give you better control over your finances.

With the above said, refinancing is not for everyone. If your home equity is below 20% or if your credit score has gotten worse, you may not qualify for a mortgage refinance. The same is true if you’re planning to sell your house soon or if you’re going through a severe financial difficulty at present time. It is best to find the perfect timing before refinancing your mortgage so that you can be sure that you’ll be able to abide by the new terms.

Overall, your entire financial situation will have to be assessed before you go for refinancing your mortgage. Our mortgage professionals can help you determine whether refinancing your mortgage is the best choice for your situation. Contact us today to schedule a consultation!

 

Advantages and Disadvantages of Using Your Home Equity to Pay Off Debt

Trying to pay various bills per month can take a lot of effort, not to mention worrying about racking up fees due to interest and dealing with the stress brought on by seeing bills pile up. Consolidating bills can give you the breathing space you need so you can focus on working to pay instead of worrying about paying on time.

One of the best ways to consolidate debt is to use a home equity loan because unlike transferring to a lower-interest card or getting a personal loan, using home equity to consolidate debt have fewer disadvantages. We’ll talk about the advantages and disadvantages of using home equity to consolidate your debts below.

Advantages of Using Home Equity to Pay Off Debt

Saving on interest is the most popular reason why people turn into using their home equity for debt consolidation. The savings are usually in the thousands of dollars per year on average. The lower fixed-rate interest of a home equity loan is also far easier to manage than trying to gain control over multiple loans. Another bonus is that the interest for a home equity loan is oftentimes tax-deductible because it is considered a second mortgage. On the other hand, if you choose to access your home equity via HELOC, you’ll have to make sure that you get a capped lifetime rate and that you make payments towards the principal to avoid fees as much as possible.

Fewer monthly payments is another popular reason for debt consolidation using home equity. It is near impossible to forget to pay when you only have to deal with a single bill instead of several.

Access to higher loan limits is one of the best advantages of using home equity for debt consolidation. If you try to consolidate debt by transferring to a lower-interest card, the limit will usually be low more so if your credit score isn’t speaking much for you; and the same goes for a personal loan. In using your home equity, you can access as much as 85% of it minus what you still owe in your mortgage. This amount can be in the hundreds of thousands, allowing you to take care of all your debts in one swift consolidation move.

Disadvantages of Using Home Equity to Pay Off Debt

The main danger in using home equity to pay off debt lies in forgetting that it is also a loan that will have to be paid later. It isn’t a long-term solution unless you take it upon yourself to learn to budget and address the factors that got you into debt, to begin with. Because using home equity for debt consolidation means taking out a loan with your home equity as collateral, failure to abide by the terms can result in you losing your home. The above are why you need to be sure that you get loan terms that you can handle, otherwise, you’ll be back in square one.

Are you thinking of consolidating debt using home equity? We can help you get on the right track! Contact us for an obligation-free initial consultation for debt consolidation.

7 Things You Have to Know About Second Mortgage in Canada

Getting a second mortgage is becoming increasingly common in Canada these days; however, not a lot of people know what a second mortgage is and how it can help them manage their finances if used correctly.

A second mortgage is a type of loan that allows homeowners to access their home equity provided that they can meet the terms set by the lender. Because a second mortgage is a loan that uses home equity as collateral, defaulting on it can mean losing one’s home. This is why you must know what you’re getting into if you’re planning to apply for a second mortgage. Before you try to find a lender, below are what you need to know about getting a second mortgage in Canada.

Bad Credit Can Be Fixed With a Second Mortgage

Consolidating multiple high-interest debts can help you pay them off faster and improve your credit score in the process. More so, getting a second mortgage even with bad credit is possible through private lenders.

Second Mortgages Come in Different Forms

There are different types of second mortgages, with a HELOC and a home equity loan being the most common. They come with different terms to meet varying needs and demands. Be sure that you pick the type that is in-line with your financial plans and status.

Interest-Only Payments Are Possible

Some second mortgages allow you to pay only the interest until the time that you decide to sell your home. This means that you can take out a second mortgage to help you finance a home renovation prior to selling so that you can sell your home for a higher value. You can then pay the second mortgage from the proceeds of the sale.

Borrow as Little or As Much as Possible

Second mortgages come with a ceiling amount or a borrowing limit that is usually based on how much equity you’ve got in your home. It is possible to tap as much as 80% of your home equity in a second mortgage with the right lender!

It is Not Free

Second mortgage fees do exist and you’ll have to consider them when weighing whether you should get a second mortgage or not. The good news is that mortgage professionals may be able to connect you with the right lenders so that whatever fees you end up paying will still be outweighed by the benefits you’ll be getting.

Interest Vary Widely

Different lenders use different interest rates depending on the type of second mortgage you’re applying for and other factors. You have to be sure that you compare lenders to get the best mortgage deal.

You Can Use Your Second Mortgage for Anything!

Funds from a second mortgage are usually used for debt consolidation. You can also use it to finance further education, invest in a business, renovate your home, go on your dream vacation, or even pay for huge medical expenses. Ask your mortgage professional for more uses for a second mortgage! Contact us today if you need help getting a second mortgage in Canada!