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4 Jul


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Refinancing your mortgage – paying off your current loan and replacing it with a different one – can either save or cost you money. While your property remains the same, the terms and interest rate on your new loan might be altered.

The cost of refinancing can be pricy, and you might face unwanted fees equivalent to when you signed your first mortgage, such as title insurance, closing costs and more. However, there are many benefits depending on your financial situation and goals. Refinancing might help you access a lower interest rate, shorten the length of your mortgage, convert your mortgage rate or consolidate debt.

If you’re unsure about whether you need mortgage refinancing, the below information can help you decide.

Interest rate

If you can secure a lower interest rate, it might be worth it to refinance your mortgage – especially if you can reduce your current rate by at least 2%. This can reduce your monthly payments and help you build equity. The money you save per month might break even with the costs of refinancing in just a few years. As well, if your credit score has improved, you likely qualify for a lower interest rate.

Length of stay

If you’re going to refinance your mortgage, you should commit to staying at your home until you break even and can thereafter achieve real savings. If you’re planning to move in the next two years, refinancing is likely not the best option for you.

Equity and second mortgage

Refinancing your home is easier if you have a high equity, such as 20%. As well, if you have a home equity loan or home equity line of credit you’ll likely benefit from a refinance. If the combined total cost of all your loans is greater than the value of the loans, you could refinance all your loans into a single loan, paying a single, low rate for the entire amount.

Other people

If you’re adding or removing someone from your mortgage, like a spouse, you’ll likely need to refinance to see if the additional person will qualify or if you can qualify on your own.

Adjustable or fixed

If the opportunity arises to convert to a fixed-rate mortgage, you might be able to access a lower interest rate and eliminate future rate increases. However, if you’re not planning to stay in your home for much longer, an adjustable-rate mortgage might be your best bet so you can reduce your loan’s interest rate and monthly payment.

Keeping this information in mind, you should also ensure your loan term remains the same so you can stick to your original mortgage payment schedule. Understanding whether a mortgage refinance is right for you can help save you money and time.

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