What Is Mortgage Refinancing?

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)

What Are The 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 wary 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!

Refinancing Considerations

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. It’s important to understand what these costs will be before moving forward.

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 me today via email at adrienne@adriennejopp.com or via call or text at 250-661-5462

One of the important factors in homeownership is understanding things like your credit score.  Some people don’t pay much attention to this metric until they begin the mortgage discussion! However, you will find that your credit score is one of the most important factors when it comes to qualifying for a mortgage at the best rate – and with the most purchasing power.

Whether you qualify for a mortgage through a bank, credit union, or other financial institution, you should be aiming for a credit score of 680 for at least one borrower (or guarantor), especially if you are putting under 20% down. If you are able to make a larger down payment of 20% or more, then a score of 680 is not required.

If you are not sure what your current credit score is, you can find out through Canada’s two credit-reporting agencies: Equifax Canada and TransUnion Canada. There are also several sites where you can have a look at your credit score for free such as Credit Karma (which pulls from Trans Union) or Borrowell (which pulls from Equifax). Once you have your credit score, always double-check that there are no mistakes and ensure you dispute any problems if applicable.

WHAT IF I DON’T MEET THE MINIMUM CREDIT SCORE?

If your credit score is accurate but does not meet the minimum requirements, you will want to look at your current debt. Homeownership is an incredible investment, but it is also costly. Fortunately, there are a number of things you can do to improve your credit score as well as your future financial success, including:

• Paying your bills in full and on time. If you cannot afford the full amount, try paying at least the minimum required as shown on your monthly statement.
• Pay off your debts (such as loans, credit cards, lines of credit, etc.) as quickly as possible. Work on paying the ones with the smallest amount owing first and work your way towards the larger amounts.
• Stay within the limit on your credit cards and try to keep your balances as low as possible.
• Reduce the number of credit card or loan applications you submit.

There is also the option of going with an Alternative Lender (or B Lender) if you are struggling with credit issues. I can help you review your credit score and provide you with options for your mortgage needs. Please reach out to me via email at adrienne@adriennejopp.com or by phone at 250-661-5462 at any time.