Hello everyone! Today we are going to talk about one of my favourite topics: refinancing! 

I love chatting about refinancing with my clients because it can be a great way for homeowners to receive a financial boost.

Refinancing can reduce your monthly household payments, help you complete home renovations, and/or get funds to purchase investments. 

When you refinance, it means you’re taking out a brand new loan (mortgage or line of credit) on your property, often for the remainder that you owe plus some additional funds to help you achieve your financial goals. Ideally, this new loan comes with better terms (i.e. lower interest rates) than your old one. 

This depends on a number of factors, including how much equity you have in the house (i.e. how much of the loan you’ve already paid off) and what your credit score is when applying.

Depending on what kind of loan you are eligible for, refinancing might offer you one or more benefits, including:

·         a lower interest rate (APR)
·         a lower monthly payment
·         a shorter payoff term
·         the ability to cash out your equity for other uses

The most common benefit of refinancing is that it helps cash-strapped homeowners find space within their monthly budget. This could be very helpful if you expect your cost of living to increase (maybe you’re having a baby) or if your income has decreased (from job loss or decreased hours).

Are you getting excited?

This is why I recommend refinancing to many of my clients. 

However, when refinancing, there are a few things to keep in mind: 

1.       Refinancing loans have closing costs just like a regular mortgage. You need to budget about $2,000 for closing costs, which include appraisal fees and legal costs. It all depends on where you live, the value of your house, and the size of the loan you’re taking out.  There may also be penalty costs involved if you are breaking your mortgage prior to its maturity date.  We will run the analysis to determine if the benefit outweighs the cost.  Penalties and closing costs can be included in your new mortgage amount.
2.       You need to have a clear plan of how you’ll use the money you free up when you refinance. If you plan to reinvest your equity in another property, education, or another purpose, be sure to weigh the costs versus rewards. I can definitely help break that down for you!
3.       If you plan on refinancing so you can pay off high-interest debt, have a clear plan to avoid overspending in the future. If you spend the equity you’ve earned on debt payoff, you’ll have to wait until your home value increases and you’ve put more years of payments toward the mortgage before you’re able to tap into that source of cash again. 

If this blog post got you excited about refinancing your home, feel free to contact me today so that we can see if this is the best option for you and your family. And don’t forget to…

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Warmest Regards,

Christina Pentlichuk