If you are a homeowner, you’ve heard the buzz around using the equity in your home. Mortgage refinancing can help you pay off your existing loan and establish a new one.
There are many scenarios in which refinancing is an excellent choice; locking into a lower rate, debt consolidation, financial emergency, or changing amortization to lower payments are some of the most common. All of these have benefits unique to the homeowner’s situation. (Read more about the advantages of refinancing)
But when does a refinance hinder rather than help?
Timing
Not your forever home? Without discussing long term plans for the property with your broker, a refinance could limit your buying or selling power down the road. If your mortgage renewal is on the horizon, be sure to understand the risks of breaking your current mortgage rather than waiting until the maturity date.
Cost is Higher Than the Savings
Read the fine print. There are costs associated with taking on a new mortgage. Appraisals, lawyer fees, penalties and potentially a higher interest rates all factor in to determining if this is the right financial decision for your family. Your broker is here to advise you of the savings AND costs so you can make an informed decision.
There is Not Enough Equity – Yet.
Most financial institutions only loan up 80% of the value of your home. Meaning, if your home appraisal is $350,000 the maximum loan amount available is $280,000. If your remaining mortgage balance is $260,000 the equity you have available is $20,000. If the current funds available are not sufficient to achieve your goals, proceeding with the process may only leave you with a band aid approach.
Equity in your home is hard earned and is an investment you should be proud of. By ensuring you access it at the right time with a strategy that aligns with your goals allows you peace of mind knowing your mortgage is working for you. Speak with one of our brokers today to learn about your options.
