Canadian homeowners, here is how refinancing can benefit you
Once you move into your new home, the epic struggle to get your mortgage approved is soon a distant memory. You set up a smooth system where the mortgage payment gets deducted every month without you lifting a finger.
The heating system starts to get wonky after a few years and the roof needs fixing. There's also a holiday to plan. And that mortgage - is that rate still working in your favor?
According to a mortgage broker from Toronto refinancing your mortgage can benefit you in a lot of ways if you nodded along while reading the last sentence.
What is refinancing?
Refinancing simply means replacing your existing loan with a new one (typically with one that has better terms).
Refinancing only makes sense when the new loan has some features that the existing loan lacks (for example, lower interest, shorter term, etc.) and, of course, has the potential to save you money.
Who is eligible for refinancing in Canada?
Chances are if you qualified for a mortgage, you will qualify for refinancing. If your income is sufficient to pay off the new loan, you have a sparkling credit history, and your home has good equity, you'll definitely qualify for refinancing.
According to Ratehub, mortgage holders in Canada can access a maximum of 80% of the value of their house less the outstanding mortgage balance.
Benefits of refinancing
Saves money in the long term
When you refinance and get a loan with a lower a interest rate, it has the potential to save you a lot of money in the long run. However, you have to bear in mind that breaking your existing term may attract penalties. Unsure
whether the penalty is worth bearing? Reach out to us and we'll help you out with the calculations.
When you refinance your mortgage, it may lead to lower payments. Since you've paid off a part of the debt and you have more time to pay off a lesser amount, it automatically means lower monthly payments on your mortgage.
Shorten the loan term
You can refinance and get a loan that has a shorter term to pay off your debts quickly. Sure, it was great to get your home financed. But living with debt can be a constant cause of worry and disrupt your other plans like setting up a college fund for your kids.
Pay off other debts
When you refinance your existing loan, the proceeds from this activity can help you pay off other high interest debts (for example, credit card bills), which in turn can help to improve your cash flow situation.
Refinancing your loan can give you an exciting opportunity to make your mortgage interest tax deductible in certain situations. After you refinance your loan, you can opt for an investment option with tax benefits.