There are various reasons why homeowners choose to refinance their mortgages. The major one is to capitalize on lower interest rates and reduce expenses. This could be attributed to the general decline in interest rates or the borrower’s enhanced credit score. A decrease in interest rates could lead to significant savings over the mortgage’s term.
Refinancing the mortgage presents an opportunity to access cash for significant expenses, such as home improvements, education, or investment. It makes perfect sense to refinance and leverage your home equity to consolidate high-interest debt. When you refinance, you can access up to 80% of your home’s equity.
Refinancing your mortgage involves settling the existing mortgage, including any penalties that may apply. The next step is to apply for another mortgage agreement with a fresh set of terms and conditions. Your present mortgage may no longer be suitable for your lifestyle or financial situation.
By re-negotiating a new contract, you can tailor the mortgage to your specific requirements. Do not let penalties deter you, as you can still reap financial benefits even after paying them off. It’s advisable to consult your mortgage broker to determine whether refinancing aligns with your financial objectives.
Borrowers have the following mortgage refinancing options:
Breaking the mortgage
A Home Equity Line of Credit or HELOC
Under this option, you can borrow the funds you need funds and only repay interest.
Blend and extend
Here, you take an additional mortgage. In this case, the interest rates will be combined.
Your mortgage broker advises you on the best option for informed decisions.