Leverage Your New Equity By Refinancing Your Home
Life happens. Whether you are facing financial emergency, wanting to improve your financial situation, put more into your investment portfolio or simply wanting to spoil yourself with a long overdue trip, mortgage refinancing can be the answer – when done properly!
Refinancing your mortgage refers to the process of renegotiating your current mortgage agreement for a variety of reasons. Essentially, refinancing allows you to pay off your existing mortgage and replace it with a new one.
There are a variety of reasons to consider mortgage refinancing, including but not limited to:
- You want to leverage large increases in property value
- You want to get equity out of the home for upgrades or renovations
- You want to expand your investment portfolio
- You are looking to consolidate your debt
- You have kids headed off to college
- You are going through a divorce
- You want a better interest rate
- You want to convert your mortgage from fixed to variable (or vice-versa)
Benefits of Refinancing
Mortgage refinancing can result in a host of great benefits, such as reducing financial stress and helping get you back on track for your financial future! Some of the larger benefits include:
ACCESS A LOWER INTEREST RATE
As mentioned above, one reason to refinance your mortgage is to get a better rate – this is especially true when done through a mortgage professional. On average, a DLC mortgage professional has access to over 90 lenders! This allows them to find the best mortgage product for your unique needs, versus traditional banks that only have access to their own mortgage offerings. Plus, using a mortgage expert allows you to benefit from their advice at typically zero cost to you.
CONSOLIDATING YOUR DEBT
There are many different types of debt from credit cards and lines of credit to school loans and mortgages. But, did you know that most types of consumer debt have much higher interest rates than those you would pay on a mortgage? Refinancing can free up cash to help you pay out these debts. While it may increase your mortgage, your overall payments could be far lower and would be a single payment versus multiple sources. Keep in mind, you need at least 20 percent equity in your home to qualify.
MODIFYING YOUR MORTGAGE
Life is that it is ever-changing and sometimes you need to pay off your mortgage faster or change your mortgage type. Maybe you came into some extra money and want to put it towards your mortgage or maybe you are weary of the market and want to lock in at a fixed-rate for security. Always be sure to talk to your mortgage professional about potential penalties.
UTILIZING YOUR HOME EQUITY
One of the biggest reasons to buy in the first place is to build up equity in your home. Consider your home equity as the difference between your property’s market value and the balance of your mortgage. If you need funds, you can refinance your mortgage to access up to 80% of your home’s appraised value!
As with everything, refinancing comes at a price! If you are experiencing a financial rough-patch or one of the previously mentioned situations and think that refinancing your mortgage could be the right solution, there are a few things to know.
The first and most important thing to understand about mortgage refinancing is that if you opt to refinance during your term, it is considered to be breaking your mortgage agreement. As with any contract, there are associated penalties for breaking them and it could end up being quite costly. If at all possible, it is always best to wait until the end of the mortgage term before any refinancing is conducted.
Beyond the penalties, there are a few additional things to know about mortgage refinancing such as:
- It allows you to tap into 80 percent of the value of your home.
- It requires re-qualification under the current rates and rules, which includes passing the “stress test” again
- No default insurance is required, which could give you more lender options
- There is typically an appraisal cost and legal fees for the new mortgage agreement
Talking to a Mortgage Professional about refinancing can provide you access to even greater rates and mortgage plans to best suit your needs and what you are trying to accomplish through your refinancing strategy. The best part? Their services won’t cost you a penny. Why wait?
Contact us at Parato Mortgage Group today.