Refinancing your mortgage means breaking your old one and starting a new one either with the same lender or another lender. This allows you to get a lower interest rate, consolidate your debts, or access the home equity you’ve built up on your home. Although a mortgage refinance comes with prepayment fees and other risks, there is a lot of benefits that you can gain from it. The key is to make sure that the positives will outweigh the risks before you refinance your mortgage.
Benefits for Refinancing Your Mortgage for 2020
Almost nothing has changed when it comes to refinancing your mortgage prior to COVID-19. There may be some delays plus the way you submit necessary documents might be a little different but overall, a mortgage refinance now carries the same benefits as before, namely:
Enjoy Lower Interest Rates
If you got your primary mortgage back when interest rates were higher, you can refinance now to enjoy better interest rates that can help you save money over the years. You might have to pay a penalty of three months of interest or an IRD (interest rate differential penalty) but know that with a refinance, those fees will only be a small percentage of what you can save.
Help with Debt Consolidation
Depending on the terms of the refinance, you can have some extra cash that can help you pay off debts or enjoy a new loan that can help you consolidate debt. Most debts like credit card debts, personal loans, and car debts have a high interest rate. By consolidating them with a lower-interest financial option, you’ll save a considerable amount of money.
With a refinance, you can access as much as 80% of your home equity. You can use this cash for anything that you want such as paying for higher education, a dream vacation, a home renovation, or for an investment opportunity.
Why Consider A Mortgage Refinance?
A mortgage refinance has many pros and cons. It is a major financial decision which shouldn’t be taken lightly. If not properly planned, you can end up paying more for fees than what you anticipated. On the other hand, it can help you get out of debt faster because you will end up paying less for interest and more towards your actual amount owed. It can free up funds that can give you a high degree of financial freedom but if not used in a smart way, you can end up in more debt. It is best to consult mortgage professionals to avoid making rushed decisions that can negatively affect your finances.
You can refinance your mortgage by breaking your mortgage contract early, blending and extending your mortgage with your lender, or by taking out a home equity line of credit. The process and advantages differ in each option as well as the processing costs. Contact us at Homebase Mortgages to find out which one might be the best option for your situation and we’ll assist you in getting approval for it.