Factors to consider when refinancing a mortgage
Lots of people see their mortgage as a lifelong liability. However, signing just a five-year mortgage does not mean you are locked; by refinancing your mortgage loan, you can use some of the equity and let it work for you.
When you consider refinancing your mortgage, here are some factors to consider.
1. Low Mortgage Rates
When it comes to mortgages, it is a cost first thing to note, who can say it will be the same rate in the next five years when your mortgage comes for renewal?
Most homeowners go for the safety and security of a fixed five-year rate mortgage. You may be protected if you are into it; you might pay more than the average rate.
Before refinancing your mortgage, you must know if it’s worth your time. You will have to pay mortgage penalties to your bank with a fixed mortgage. Therefore, it is essential to do the calculations to ensure that your savings offset your penalty charges.
2. Tap into Your Home’s Equity
Maybe you are thinking of adding a second floor to your bungalow for your growing family, or you need help to fund your retirement; the best option may be to refinance your mortgage.
If you are refinancing your mortgage, you can borrow up to 80% percent of what your home is worth at the time of financing.
When you decide to go for a Home Equity Line of Credit (HELOC), or you decide to blend and extend your mortgage, you can also take advantage of better interest rates. With interest rates today nearing a low record, there is no other better time to invest in your home!
3. Consolidating Your Debt
Do you have a problem with your debt? Do you still struggle to pay your bills? Then consolidating your debt may be the right solution. As discussed above, your mortgage is one of the best and most affordable means of debt you can encounter if you have a high-interest credit card, car, and payday loan, consolidate your debts with the mortgage. After that, you’ll have to only worry about the monthly mortgage payment, so you won’t have to go through the stress of handling multiple bills.
A consolidated loan is not only convenient, but it can also save you lots of money. For example, the interest rates on some store credit cards are a bit costly, with up to 36%. But with a consolidated loan, more of your money will go with the principal rate and less towards interest rates so that you can be free from debt sooner.
Deciding to refinance your mortgage can be good, but it is important to sit down and discuss with your mortgage broker. By considering all your options, you determine if refinancing would be the best option for you.