There really is no perfect time to refinance your home. The answer depends entirely on why you want to refinance your home and whether or not you are financially prepared to do so.
Refinancing your mortgage is a serious and long-term commitment. It should not be entered into lightly.
For this reason, The Mortgage Force team wants to ensure that you understand what it takes to refinance your Edmonton home. This way, you can make an informed decision that benefits both you and your finances.
Ready to get started? Let’s start with five important you should ask yourself before signing the dotted line.
1. Do I Need a Loan?
Before you contact a lender about refinancing your home, it’s important to determine whether or not you have a good reason to apply for a loan.
For example, a good reason would be if you are planning to renovate your home as this would increase the value of your property.
Other good reasons include:
- Funding your child’s education
- Starting a new business venture
- Buying a new property
- Consolidating debts
- Lowering interest rates
Borrowing against your home is a temporary solution, but also an opportunity to build good credit history. If done properly, it can improve your financial situation in the long run.
2. Is Refinancing My Home My Best Option?
While the lower interest rates that come with mortgage refinancing are beneficial, they don’t apply to all applicants in all situations.
This is why you should explore all possible options and research the current value of your property as well as regional market rates.
You may find that while refinancing is a good option, now is not the best time. Speak to a mortgage professional who can give you an evaluation of market conditions and help you decide if refinancing is your best option.
3. Can I Afford the Monthly Payments?
The amount you can borrow depends on the appraised value of your home and the remainder of your current mortgage. You can only receive a loan that amounts to a maximum of 80% of your home’s appraised value. Add in new interest rates, mortgage insurance, and administrative fees and you’ll have your owing amount.
This is why it’s important to ask yourself how much you can afford to borrow because you will have to work the monthly payments into your budget. At this point, it may be worth considering whether you urgently need the money or if you can take the time to save for what you need.
4. What is My Credit Score?
Getting approved for a loan application all comes down to your credit score. Lenders look at your credit history to see how good you are at handling money and making monthly payments.
Those with low credit scores are considered high-risk borrowers and may have their applications turned away. If their applications are approved, they will likely face higher interest rates.
If your credit score is low, take the time to fix it before applying for mortgage refinancing. You can even speak to mortgage specialists about ways to improve your credit.
5. What Are My Refinancing Options?
If you have answered the questions and are ready to refinance your Edmonton home, it’s time to look at your refinancing options.
Depending on your situation, your lender may offer you one of the following:
- Second Mortgage: This is a second loan you can secure using your home’s equity but you have to pay off the new mortgage as well as the original one.
- Home Equity Line of Credit (HELOC): This works like a typical line of credit but is secured by your property. You can withdraw and repay funds as needed.
- Prepayments: If you made prepayments on your mortgage, you may be able to re-borrow a portion of those payments from your lender.
- Reverse Mortgage: If you are at least 55 years of age, you may qualify for a reverse mortgage.
When it comes to mortgages, your lender can also offer you different terms and interest rates such as a fixed-rate mortgage, a variable-rate mortgage, or a combined rate mortgage.
A fixed-rate mortgage means that you will pay the same monthly payment and interest rate throughout your mortgage term. Variable-rate mortgages can fluctuate your mortgage payments depending on market conditions. A combined rate mortgage includes both fixed and adjustable rates.
How to Refinance Your Edmonton Home
Once you have covered all of your bases and have decided that refinancing your Edmonton home is the right step for you, it’s time to contact a mortgage specialist!
You could approach lenders on your own but a mortgage professional can help you gather all of the necessary documentation to ensure the application process is completed properly. They may also represent you to lenders by submitting your application on your behalf.
Once your application is submitted, the lender will evaluate it and determine whether or not you qualify to refinance your home. At this point, it’s important to read and review the terms and conditions of the loan agreement, paying close attention to interest rates and other costs. Be sure to ask for clarification before agreeing to their terms.
It may be possible to negotiate lower interest fees with the help of a mortgage specialist. Any reduction in interest will help you properly budget for payments, additional fees, and upfront costs.
Refinancing Your Edmonton Home
There are a variety of reasons why Canadians choose to purchase their own home. Some want the stability of owning their home while others wish to use their home as an investment vehicle.
Home-ownership has proven to be a stable long-term investment. Recently, there has been a large movement to refinance home mortgages and use equity for home improvements, college expenses, and other investments.
Overall, mortgage lending is the cheapest form of borrowing. Our expert mortgage specialists can help you unlock up to 80% of your home’s value and convert that into usable funds to reach your financial goals.
Book your appointment today to speak to one of our mortgage professionals!