There are several reasons why you might decide to people don’t understand what it means to refinance your mortgage. Here is what you need to know if you decide that mortgage refinancing is right for you.
When the loan against your existing mortgage is paid off you can use the same mortgage to create a fresh loan if required. This is a perfect tool to convert a variable loan into a fixed rate one or generate funds in a situation where you might require an additional resource base. This is an option only for borrowers who have a strong credit history. Mortgage refinancing also leads to a lower interest rate.
Purpose Of Mortgage Refinancing
Mortgage refinancing is an option when you need additional funds. You can go this route for many purposes including:
- Home renovation
- Buying a second or additional property
- Investing in other asset classes like stocks/commodities
- Buy a car or a boat or other tools of convenience
Another reason why mortgage refinancing could come in handy is debt consolidation. If you have more debts than you can handle, you can to lower the interest payout by refinancing your mortgage. In addition to offering lower rates of interest on your refinanced mortgage, most Canadian banks also offer attractive pre-payment options. This can help you pay off your debts in less time. The thing to keep in mind is that you need to be financially responsible to ensure your debts are paid off. Mortgage refinancing may not be a solution in some cases.
Options to Refinance Your Mortgage
That said here is a look at some of the key ways in which an individual can refinance the existing mortgage and improve the overall cash flow. Whether you are approaching a bank or a financial institution, it is always advisable to discuss the possible scenarios with an expert before taking a call. The key benefit is the advisor can give the right direction to you based on the long-term goals and ground realities:
- Mortgage add-on: In this, you can borrow as much as 80% value of your home that is used as a mortgage. Of course, the remaining mortgage amount from the previous would be subtracted.
- Flexible loan plan: This is an option in a situation where an individual’s home equity is equal or more than 20%
- Secured credit line: This is yet another mortgage refinancing alternative used by many Canadian banks. The interest rates for these are generally lower than an unsecured credit line.
Mortgage refinancing can help address a long-term finance requirement. It’s important to talk to your financial advisor to determine if this option is the best solution for you. Our mortgage payment calculator can help you determine your current financial ability to pay off your mortgage.