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Refinancing guide
31 July 2009

There can be a lot of reasons to refinance a mortgage. Whether it’s to take advantage of better rates, consolidate debt or use the equity in your home for important purchases or investments, it’s important to understand how the process works, how much it will cost you, and whether you will actually benefit in the long run.


Figuring out which refinancing option is right for you can be complicated. We can help you run any number of scenarios to determine how best to meet your goals and maximize your savings.


Refinancing basics
Essentially, refinancing means paying out the existing mortgage with a new one. The new mortgage does not need to resemble the old one at all – it will have new terms and new rates, based on the current conditions and your current situation. It can also be larger than your previous mortgage, allowing you to put your valuable home equity to better use.


Even though there may be penalties associated with paying out the old mortgage early, these can be far outweighed by the savings offered by the new mortgage. We have tools and calculators to help you get an idea of whether a new mortgage would be to your advantage, or call us today to find out more.


Renegotiating your mortgage
The simplest kind of refinancing is renegotiating your existing mortgage. If you signed onto higher interest rates, you may well want to consider how you might take advantage of today’s historically low rates.


For example, if today’s rates are substantially lower than the one you signed for a couple of years ago, even with penalties, you could save thousands of dollars in interest by renegotiating.


Not only would you save the difference in interest from your old mortgage, but if rates go up in the near future, you would be locked in at the lower rate, instead of having to sign at a higher rate when your existing mortgage term came to an end.


At lower rates, your monthly payment would also be reduced; however if you can maintain the higher payment, you will pay down your mortgage a lot faster, increasing your savings.


This can amount to thousands of dollars over a period of just a few years, with just the effort of a phone call.


However, it’s important to understand exactly what the penalties are for paying off your mortgage early, as this can dramatically affect how much you save. Understanding your mortgage contract is something we can help you with, to determine whether refinancing your mortgage is the right choice for you.


Debt Consolidation
Debt consolidation is an important way to save money on expensive loans such as credit cars, car loans and lines of credit. If you have built up equity in your home, it may be worth your while to refinance your mortgage and use that equity to pay out your more costly debts. For all intents and purposes, you would be bringing all your debts under one heading: your mortgage. Since mortgage interest rates are usually the lowest of all loans, this can save you money on interest, simplify and reduce your total monthly payments, reduce the number of creditors you owe and help repair your credit score.


For example, if you are carrying thousands of dollars on a credit card that charges 18% interest, you would benefit substantially by having that debt added onto your mortgage, which at today’s rates could be less than a quarter of the price.


For those whose financial standing has been impaired by a heavy debt load and poor repayments, this can be a way to regain credibility with lenders, by consolidating your payments into a single, manageable amount.


However, it is important to have built equity in your home. If you’ve been paying a mortgage for a few years, made additional payments to a newer mortgage, or placed a substantial down payment on your home, you may be eligible for debt consolidation.


Refinancing to make an important purchase
Refinancing can be a cheap and useful way to use the equity in your home to make a major purchase at a low interest rate, instead of taking out a loan at a typically higher interest rate. Whether it’s a much-needed home renovation, your child’s university education or a new car, refinancing can let you increase your mortgage amount to put some of that hard-earned equity toward the necessities, without having to pay exorbitant loan rates. You can even use the refinance to make a down payment on an income-earning or investment property.


Chances are too, that refinancing in today’s market will mean additional savings, allowing you to shop around for a better rate and better options.


Refinancing to invest
The equity in your home can also be used to purchase investments where the returns outweigh the interest on the mortgage. Additionally, the interest costs can be written off against the taxable income.


Consult with our mortgage specialists today to see which of these options best apply to you! Call Now 1-866-RATE-708 or fill out a fast mortgage application.