Home Refinancing

Home Refinancing – Should you refinance?

Home refinancing is re-writing your home mortgage contract for the purpose of getting a larger loan using your home as security. By refinancing your home mortgage, you are taking equity out of your home. A new mortgage contract will replace your existing contract you have with your bank. There are certain costs involved in home refinancing, you should find out the costs and benefits of refinancing your home.

You can find out from your bank or get help from your local mortgage broker if you need to refinance your home mortgage. Whether you can be approved to refinance your home mortgage depends on 2 important factors:

Firstly, you are able to service the monthly loan repayment.

Secondly, you must have a good credit standing.

The common reasons for home refinancing are:

  1. Emergency cash need. You need a sizable amount of cash for an emergency.
  2. Lower your monthly payment. Your present mortgage is locked in at a higher rate. Refinancing your mortgage at a lower interest rate saves you money.
  3. Consolidate high interest debts. This is the most common reason for many home owners refinancing their home mortgages. For example:

A home owner carrying $50,000 of credit card debts and personal loan will likely be making over $1,500 monthly payment on interest at 8.5% to 20%. Refinancing the $50,000 debt at 5.5% will only require monthly payment of $305, improving your cash-flow by $1,195 a month. The savings on your interest payments could be in excess of $200 a month or $2,400 a year.

Get extra cash for investment or personal use.

Home refinancing can free up equity in your home to buy an investment property, to buy a business or you can use the money to go for a vacation. Some home owners use their home equities as investment capitals for high yield investments.

Some may choose to use the additional income they received to pay off their home loans sooner.

Evaluate the cost and benefit of home refinancing

You should consider the total costs associated with home refinancing. The cost of getting a home equity loan is minimal. The cost involved in refinancing your home is more and may involved prepayment penalty. But, sometimes that may be your only solution to free up the money you required. Home refinancing could be a problem with your bank if you have bad credit.

If you have any questions on refinancing your home or how to consolidate your high interest card debts and personal loans, you can kindly contact me (Elsie Tse) at 604-716-3369 for a discussion.

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