If you already have a mortgage, you can break your current mortgage contract mid term and "refinance". There are several reasons as to why someone may want to do this. Below are some of the most common reasons: 1) To Consolidate Debt: One of the most common reasons clients choose to refinance is to consolidate their monthly debt payments. For example, if you have a car payment, credit card debt, lines of credit etc. you have to make several debt payments each month. By consolidating, you can have one easy payment each month. This usually helps clients who are struggling have peace of mind and often the new mortgage payment can be must less then paying all your debts separately. When consolidating debt, there is no one size fits all option. I find every clients situation is different and we can customize their refinance to suite their own personal needs. The process is quite simple and easy to do. 2) For a Lower Rate / Lower Payment: Since mortgage rates change all the time it is very common for your current mortgage rate to be higher than what banks are offering today. You can break your current mortgage term and lock in a new lower rate. If you are wanting to saving money on interest you can choose to keep the same mortgage payment amount that you are used to, with the new lower rate, which will help you pay off your mortgage sooner. If you want to have a lower monthly payment, your new lower rate may be able to help you with that. Often, you can also renegotiate your amortization when you refinance. For example, if you currently have 20 years left to pay off your mortgage but circumstances have changed and you need your payment to be lower you can request to increase your amortization up to 30 years which will lower your new mortgage payment significantly. 3) For Home Improvements: Has your home value increased or do you want to reinvest in your home by making home improvements? Refinancing is a very affordable and easy way to do that. Instead of taking out a loan, or a line of credit, you can refinance
your mortgage which offers optimal interest rates, and typically lower monthly payment obligations. You will get cash at the end of the refinance so you can pay for the home improvements you desire. Common home improvements are upgrading kitchens, bathrooms, flooring, windows, finishing basements, adding a pool or special landscaping! 4) Divorce/Spousal Buy Outs: I have helped my clients through their happiest moments (buying a new home) and some of their not so happy moments (separation and divorces). When divorcing, it is very common for one of the spouses to stay in their current home. In order to do this, most of the time that spouse will buy out the spouse that is leaving the home. If you not have cash to facilitate this, you can refinance your current home and use the equity to buy them out and take over the home ownership by yourself. 5) Investment Opportunities / Equity Cash Take Out: Life can sometimes bring you amazing opportunities that require cash that you may not have full access to. If you have equity in your home, you can access it through refinancing and take out cash for investment opportunities. A very common investment opportunity is buying a rental/investment property. Building your net worth through real estate has been a proven investment for many Ontarians over the years. You can take the required down payment out of the equity in your current home, or if you have enough equity you could even buy the rental home outright.
6) Buying a Vacation Property or Second Home: This has also become increasingly common, especially over the last couple of years. You can use your homes equity to get down payment for a vacation property, or buy it outright if you have enough equity to do so. It is also common for parents to buy homes for their children to live in while attending University and you can refinance to assist with this process as well.
All in all, there are many reasons someone may want to refinance and access the equity in their home. Above are just a few common reasons. If you have been thinking of refinancing and are wondering if it makes sense to do so - feel free to call me and we can discuss options! Thanks for taking the time to read my blog, I hope it was helpful!
Tess Velkovska Mortgage Agent Excel Mortgage