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How do you know when it’s time to refinance?

For many homeowners, the process of buying a home is stressful, but once it’s over and the moving boxes are emptied, there are overwhelming feelings of satisfaction and joy. It would be easy to take a break from thinking about all things relating to home finance at that point! However, over time, a homeowner’s financial circumstances can change. There may be cases when refinancing your mortgage – the process of exchanging your existing mortgage for a new arrangement, either with the same lender or a new one – can be a good financial decision.

In partnership with your mortgage broker, you can make significant changes to your monthly financial obligations. Here are three possible scenarios in which you may wish to consider refinancing your mortgage.

You require a debt consolidation

Mortgage interest rates are generally lower than those found with other consumer lending products. If you are carrying several high-interest debts like auto loans or credit cars, refinancing your mortgage to consolidate could provide you with one monthly payment instead of several different ones to manage. Having a single monthly payment can make it easier to manage your household expenses and pay bills on time.

Your financial situation has improved

As discussed in a post in our Road to Better Credit series, those who have a blemished credit history may have difficulty obtaining the lowest rates for mortgages and other loan products. However, over time, an improved credit score can lead to lower interest rates. You may have initially secured a mortgage at a relatively high interest rate because of a short-term condition that impacted your credit rating. If that condition has since been resolved, you may be able to refinance your mortgage at a lower rate. Speaking with a mortgage broker can be the first step toward lowering your monthly financial obligations with a new mortgage.

You have built up significant home equity

As homeowners in many parts of Canada know, especially those major urban centres, the value of your home can increase significantly over time just because of changes in the local real estate market. That increase in value is helpful, if not necessarily practical, because it’s not quite as accessible as money held in other investment vehicles. However, it can be very useful if you choose to access some of the equity stored in your home. For example, you could refinance your mortgage to complete a home renovation, purchase a second property.

There is more to consider when refinancing than just a lower rate or monthly payment. For example, there may be appraisal fees, the cost of title search and insurance, and legal fees that will affect the financial outcome of refinancing. However, there is peace of mind in learning that your current mortgage is the best one available to you. By taking the time to learn more about mortgages, you can feel confident about the financial decisions you make.

Talk to your mortgage broker and visit the Home Trust website for more information about buying or refinancing your home.

The information, materials and opinions contained in this Blog are provided for our information only. This Blog does not constitute legal, financial or other professional advice and you should not rely on it as an alternative to specific advice based on your particular circumstance. This Blog contains links to third party websites. These links are provided for information and convenience; Home Trust does not endorse the content of any third party website, and it makes no representation or warranty as to the information on such third party sites. By clicking on any link to a third party site, you leave Home Trust’s website and do so at your own risk. Home Trust disclaims all liability for any damage or loss that results from your access to or reliance on information contained in this Blog or any third party site.

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