Refinancing is a great option for homeowners who want to save money on their mortgage. In many cases, refinancing can lower your monthly mortgage payment and save you thousands of dollars over the life of your loan. Here are five benefits of refinancing that you should consider.

1. Lower Interest Rate

One of the primary reasons to refinance your mortgage is to lower your interest rate. If interest rates have gone down since you first took out your mortgage, refinancing can help you take advantage of those lower rates. This can save you thousands of dollars over the life of your loan.

2. Lower Monthly Payment

Another benefit of refinancing is that it can lower your monthly mortgage payment. This can provide you with more money each month to put towards other expenses, such as saving for retirement, paying off debt, or taking a vacation.

3. Shorter Loan Term

If you want to pay off your mortgage faster, refinancing can help. By refinancing to a shorter loan term, you can pay off your mortgage in less time and save money on interest charges. For example, if you have a 30-year mortgage and refinance to a 15-year mortgage, you can save tens of thousands of dollars in interest charges.

4. Cash-Out Refinancing

If you have equity in your home, you can use cash-out refinancing to access that equity. This can provide you with cash that you can use to pay off debt, make home improvements, or invest in other opportunities.

5. Switch to a Fixed-Rate Mortgage

If you currently have a variable-rate mortgage, refinancing to a fixed-rate mortgage can provide you with more stability and predictability. With a fixed-rate mortgage, your interest rate will stay the same for a set number of years e.g. 3 years, which can provide you with peace of mind and make it easier to budget for your monthly mortgage payment.

Refinancing your mortgage can provide many benefits, including lower interest rates and monthly payments, shorter loan terms, and access to cash. However, there are also potential downsides to consider before making this important financial decision. In this article, we will explore the pros and cons of refinancing, so you can make an informed decision about whether refinancing is right for you.

Lower Interest Rates

One of the primary reasons to refinance your mortgage is to take advantage of lower interest rates. If interest rates have decreased since you first took out your mortgage, refinancing can help you save money over the life of your loan. This can mean lower monthly payments and thousands of dollars in savings.

Lower Monthly Payments

Refinancing can also lower your monthly mortgage payment, providing you with more money to put towards other expenses. This can be particularly helpful if you are struggling to make ends meet or want to save for other financial goals, such as retirement or a vacation.

Shorter Loan Terms

Refinancing to a shorter loan term can help you pay off your mortgage faster and save money on interest charges. For example, if you currently have a 30-year mortgage and refinance to a 15-year mortgage, you can save tens of thousands of dollars in interest charges over the life of your loan.

Cash-Out Refinancing

If you have equity in your home, you can use cash-out refinancing to access that equity. This can provide you with cash that you can use to pay off debt, make home improvements, or invest in other opportunities.

Cons of Refinancing

Refinancing cost

One of the potential downsides of refinancing is that it can come with fees.  (Government regulation in 2011 outlawed most early repayment and exit fees)

The most common fees to refinance are.

• $350 discharge fee
• Discharge and registration fees = $224.32 *2

PLUS, some lenders offer a cash back for refinancing which covers the exit fee

BREAK COST

If you have a Fixed Rate mortgage, there may be a Break Cost payable if you break your Fixed Rate before the Fixed Term expires. The bank calculates this Break Cost internally. (The lender can give you a quote for what you’re Break Cost might be)

The Break Cost is only usually payable if the Fixed Rate has gone down since you got your home loan e.g. if you Fixed at 5%, and now two years later Fixed Rate is 3% the bank will charge you a Break Cost if you want to refinance or pay out your 5% Fixed Rate home loan before the Fixed Rate expires. 

Extending the Life of Your Loan

Refinancing can also extend the life of your loan, which means you will be paying interest for a longer period. This can offset some of the savings you might see from lower interest rates or monthly payments.

Qualification Requirements

To qualify for refinancing, you will need to meet certain requirements, such as having a good credit score and a stable income. If you do not meet these requirements, you may not be eligible for refinancing or may not be able to get the best rates and terms.

Conclusion

Refinancing your mortgage can be a great way to save money and achieve your financial goals. However, it is important to weigh the pros and cons before making this important financial decision. Consider factors such as closing costs, the length of your loan term, and your eligibility for refinancing before deciding if it is right for you.

If you are considering refinancing your mortgage, contact GreenSpace Finance Mortgage Brokers to learn more about your options and how we can help you achieve your financial goals.

Refinancing your mortgage can be a great way to save money and achieve your financial goals. However, there are also some potential downsides to consider, such as closing costs and the possibility of extending the life of your loan. Be sure to weigh the pros and cons before deciding if refinancing is right for you.

In conclusion, refinancing your mortgage has many benefits that can help you save money and achieve your financial goals. By taking advantage of today’s low-interest rates and exploring your refinancing options, you can lower your monthly mortgage payment, pay off your mortgage faster, and access cash that you can use to achieve your financial goals.

Contact GreenSpace Finance Mortgage Brokers to learn more about refinancing.