Interest rates have dropped considerably since the early 1980s, when, if you were contemplating buying a home in Calgary, you faced a prime rate of 15.81 per cent. Since 2001 prime rates have hovered around four to six per cent – a drop with the potential to make a big difference on your monthly payments if you bought long ago.
If you are coming to your renewal date, are a long-term homeowner and haven’t refinanced yet, it might be time to consider the pluses and minuses. Refinancing can be a great way to potentially offer a bit more financial flexibility, but it’s not an option that should be approached lightly. Under some circumstances, refinancing can be an outright mistake. Or sometimes refinancing is the right choice, but the timing is wrong. By working with Mortgages by Candice, homeowners can be sure they will be well informed an all the positives and potential negatives. Refinancing at the optimum time can help you meet long-term goals if handled properly.
What are Your Financial Goals?
Having a clear understanding of your specific financial needs and goals will help you decide whether or not you should consider refinancing your mortgage. Be sure you know exactly what you hope to accomplish. It is important to remember that when you refinance you are not paying off your debt — you are simply restructuring it.
The most common goal of refinancing is to reduce the interest on your mortgage. Other homeowners choose to refinance to reduce their monthly payments. And still others opt for refinancing to consolidate or pay off debts. Homeowners with first and second mortgages (or a home equity loan) often refinance in order to combine both loans at one fixed rate. Cash-out refinancing can help accomplish goals like paying off credit card debts, provided you are comfortable with the risk of converting an unsecured debt into a secured one. But consider this: if you miss credit card payments, you will get calls from collection agencies and have your credit score lowered, but if you don’t pay your mortgage, you could lose your home.
When to Refinance
Most mortgage experts recommend you only refinance once, so you want to make your decision carefully. Is the timing right? Typically, it is best to refinance when you plan to be in your current home for some time. The expenses associated with refinancing (closing charges, taxes, insurance, and other fees) can take months of lower payments to even out the costs.
Be sure you understand the big picture of your current mortgage. If you are considering mortgage refinancing, you probably already know your interest rate, but do you know the terms of your current mortgage? Does the loan have a prepayment penalty that would add to the costs? What is your credit rating? Could a low score make getting a new mortgage more difficult right now?
If you refinance for a lower interest rate but extend the length of your mortgage, will you pay more or less interest over time? Your mortgage broker will perform these calculations with you. If you are interested in lowering your monthly payment, a longer-term loan and a lower rate can both help you achieve this goal but, of course, you may not save on interest over time.
The Key to Mortgage Refinancing
Because it is important to understand all your options, working with a mortgage broker can provide you with independent, expert advice. Not only can a broker get you the best rates and terms, but they can also help you select a product that manages the costs associated with refinancing. Mortgage brokers understand how to read market trends and know all the options available. If you currently owe more on your home than it is worth, or if your circumstances might make it difficult for you to qualify for a new loan, a broker can help you find a solution.
Mortgages by Candice works with many different lenders, has access to the very best mortgage rates and terms, and takes the time to get to understand your financial situation and your future objectives. We will find a Calgary mortgage refinancing option that is best for you in the long run.