Homeowners refinance mortgages for all sorts of reasons. Lately, you’ve been wondering if one of those reasons might apply in your case. Before you set out to find a lender, it pays to have some idea of what you want to accomplish. Once you know that, you’ll be better equipped to consider different ways to refinance your mortgage and settle on the one that achieves the goal. Here are four key points to settle before that search begins.
Is the Timing Right?
Is this the right time to consider refinancing an existing mortgage? The answer depends partially on the current state of the economy and where it’s headed. It also depends on your personal circumstances.
Ideally, the economy is robust enough right now for you to be able to lock in better terms and conditions than you have with the current mortgage. The fact that lenders are willing to compete for your business also makes this a perfect time to make a change. If you find that lenders are willing to extend terms that will make life a little easier for you in some way, do proceed. If you suspect that next year would be better and there’s not a pressing need to refinance, delay the search for awhile.
Fixed or Variable Rate?
If the timing is good, turn your attention to what sort of interest rate you can get. You may be the type who prefers a fixed rate that will apply for the duration of the new mortgage. That’s great if you believe that interest rates will not drop significantly while you’re paying off the debt.
It never hurts to consider what a variable rate could do for you. The refinanced mortgage will begin with a term of several years at a fixed rate. After that, it will be adjusted or vary from year to year. When you suspect that the average mortgage rate will decrease down the road, this option may be the best way to go.
Seeking a Shorter Term?
Perhaps the point of refinancing is to pay off the mortgage sooner rather than later. Assuming you can get a better rate and also shorten the term, this is a great way to do that. You still end up with a figure that you need to set aside to make the mortgage payment every month. You’ll also retire the debt sooner and end up paying less in interest over the life of the loan.
Or Wanting More Affordable Payments?
You may not be concerned about paying off the mortgage sooner. Your strategy is to free up more of your monthly income by locking in a lower monthly payment. You’ll find that a Toronto & GTA mortgage broker can help you with this. The refinancing could result in a more affordable payment that doesn’t significantly extend the number of years it will take to own the home outright.
Define your motivations for seeking refinancing first and then go see what you can find. Taking your time and comparing all of the options will increase the odds of being happy with the outcome.