A mortgage refinancing transaction occurs when an old loan is swapped out for a new one. The old loan is paid off using the proceeds of a new one. With mortgage refinancing, a lot of money could be saved. Hence for those planning to opt for the best mortgage refinancing in Kitchener, here are some basic things that should be considered for its preparation.
Benefits of Mortgage Refinancing
Refinancing helps you in improving your financial situation as you can:
- Lower monthly payment
- Reduce risk
- Lower lifetime interest costs
- Get cash out for other purposes
- Mortgage Refinancing Costs
- Consolidate debt and possibly get tax benefits
However, availing mortgage refinancing is not free. You need to pay compensation for the new lender in offering the loan. Then there are such expenses as fees for legal documents and filings, appraisals, credit checks, and much more. Even for a “no closing cost” loan, you still have to pay the fees. Usually, the interest rate is higher.
Does Mortgage Refinancing Make Sense?
Before taking help of any mortgage loans Consultant in Kitchener, you need to weigh the advantages and disadvantages of your old mortgage and find a new mortgage. Generally, it is wiser to go for mortgage refinancing when one can save money by shortening the loan term, lock in a lower payment or interest rate, or make optimum restructuring of debt.
Once the cost is understood, you need to evaluate the amount of time you can save and the duration of recouping any up-front costs connected with mortgage refinancing. Is it worthwhile to keep the loan (or stay back in the home) for enough duration to make it useful?
The main reason for people going for refinancing is to get a lower mortgage rate. In spite of sinking rate, many people have not gone for refinancing.
Often, borrowers looking for stability are leaving adjustable-rate mortgages and going in for refinancing fixed rate loans.
It is also seen that one goes for mortgage on a paid-off house. The move is not refinancing though, but it is a close. Often mortgages are availed by mortgage-free homeowners to put cash in pockets.
When it’s a Good Idea
Going for mortgage refinancing is a good idea when there is real benefit from a new loan. To find whether it is a good idea, here are certain clues to look for:
- Interest rates are low
- You will keep the loan for a long time
- Your credit has improved since you got your first loan
- You can avoid getting stung by a high risk mortgage
- When it’s a Bad Idea
- instead of an interest-only loan, you can avail amortizing loan
It is no good to go for refinancing your mortgage, if there are good chances of wasting your money while increasing the risk. There could be chances where having a lower interest rate along with monthly payment option can turn out to be costing more in the long run – even if it is helpful now. You should also ensure to recoup the different mortgage refinancing fees before actually acting on it.
Author: Pamela Smith is a mortgage loans Consultant in Kitchener and provides clients with the best mortgage refinancing in Kitchener.