Refinancing your mortgage is a smart financial move. You’ll be able to access the built-up equity in your home, pay back debt, and make major renovations and changes to your property. What’s the most important advantage? Lower interest rates!
If you’re a homeowner looking to benefit from any of these features, then take advantage of the low interest rates created due to the pandemic. However, is it the right move to do a mortgage refinance in Ontario? While this will depend on your personal financial goals and obligations, refinancing is typically a good solution for most homeowners.
Read on to learn about the benefits of refinancing your mortgage.
1.Historically Low Interest Rates
As mentioned, the COVID-19 pandemic has created an environment of historically low levels of interest. Thus, if you take advantage of this dip, you’ll be able to reduce your overall interest rate and lower your monthly mortgage payments.
If you’re unsure how much of a difference low interest rates are, then let’s look at the math. If you have 20 years left of your mortgage amortization period, then here is the total interest you’ll pay with different rates:
3.19% interest will result in $141,590 put towards interest
2.29% interest will result in $98,942 put towards interest
1.39% interest will result in $58,402 put towards interest
As you can see, what you pay in interest can significantly differ according to your interest rate. This proves the benefits of lower interest rates when refinancing your mortgage.
2.Lower Monthly Payments
Your low mortgage rate will allow you to reduce your monthly payments, which will, in turn, benefit your bottom line. You can do this by extending your loan term, thus spreading your payments over a more extended period. With less going out every month, you’ll also have extra income to use towards debt consolidation or however you please. The low monthly payments will be necessary for those on a tight budget looking for financial breathing room.
One of the most significant advantages of refinancing your mortgage is the access you’ll be granted to equity. Home equity is your property’s value minus the mortgage balance left to pay. Homeowners can access this home equity for use in many different ways.
For example, paying for education, purchasing a secondary property, and debt consolidation are great ways to use your built-in equity. You’ll be able to access up to 80% of your home’s equity. This can be done by increasing your monthly mortgage payments or using a mortgage calculator to understand how much equity will be available to you.
By accessing the built-in equity of your property, you’ll be able to manage any high-interest debts that have piled up over the years. This can help you consolidate or reduce your debts. Homeowners with excessive debt may risk defaulting on payments, missing payments, or compromising their financial history and credit score.
This can be detrimental to your financial future, so it is better to consolidate through refinancing. You can do this by “cashing out” when refinancing. In other words, you can replace your primary mortgage with a new larger mortgage. The difference can be chased out, but up to 80%–85%. That can yield significant results and help you take out a loan or reduce your debt. In addition, the interest rate you pay on the money you owe will also subsequently come down.
5.Finance Major Life Expenses
Using the same principle as debt consolidation, you can use your equity for other significant life changes. Many Canadian homeowners will use their equity to finance other aspects of their life, such as investments, their children’s education, and more. By renovating or updating your property, you will also increase its value, which can come in extremely handy down the line. Many homeowners are working remotely right now, so making home improvements such as a property extension or setting up an office will be very helpful.
In addition, opting for a mortgage refinance in Ontario will provide you with a much lower rate of interest than a personal line of credit or a credit card. Using this method means you’ll be able to save money in the long run and build your credit history back up slowly.
When you opt for a mortgage refinance in Ontario, you will also benefit from financial stability. Once you decide to go ahead with the mortgage terms, you’ll be locking in your mortgage interest rate for five years. That’s a long time to go with a guaranteed rate of interest that is comparatively lower! You will stay secure with your finances and can put away cash for emergencies or other pressing needs.
For many homeowners, their mortgage remains set in stone. They make the payments according to the terms and soon forget about it. However, refinancing your mortgage is a great way to get a better deal, and you don’t need to wait until your next renewal to do it.
As you can see, refinancing your home comes with significant benefits! You’ll be able to consolidate debt, access equity, make renovations, and so much more. If you’re looking for a reputable and reliable mortgage broker to guide you through the refinancing process, be sure to reach out to Canadalend.com. We offer the most competitive rates, with specialized industry knowledge from friendly and dedicated staff. You can also increase cash flow and save money!
For more information on getting a mortgage refinance in Ontario, call Canadalend at 1-866-422-6536 or contact us here.