Refinancing Your Mortgage in Ajax – 6 Practical Facts to Keep in Mind

Simply put, refinancing your mortgage is when you break the current mortgage and replace the loan with a new one. You can get a new mortgage from the current or new lender. Homeowners typically opt to refinance for lower interest rates or dip into the accrued equity when they need the money to consolidate their debts. In case you’ve been considering this option, do remember that refinancing incurs a substantial prepayment penalty. Make sure this is the best option available to you before making the decision. Here are the key factors to keep in mind:

  1. Although lower interest rates can help you save over time, check if the savings make up for the penalty given the size of the outstanding mortgage, or the balance loan amount you owe on the house.
  2. Even if the lender is offering you lower interest rates, check for the loan term. Oftentimes, lenders extend the loan period. Essentially, you’ll pay the same interest over a longer term.
  3. Refinancing your mortgage allows you to access up to 80% of the home value. However, you can only borrow against the amount you’ve already paid or equity. If you have any other debts or obligations, lenders factor them in also.
  4. Using the accrued equity, you can consolidate any other dues and pay off high-interest debts. Although you can become debt-free sooner, the process typically requires you to get budgeting and money management counseling from an expert. The licensed professionals at Dunlop Mortgage can guide you in the right direction.
  5. You have the option of taking a home equity line of credit (HELOC) where you get the money you need using the house as collateral. Choose this option only if you’re confident of a steady income so you can repay your loan. Or, you risk losing your home.
  6. Depending on your particular situation, the existing lender might offer you a loan. The interest you’ll pay will be a blended rate that combines the existing mortgage rate with the market rates on the new loan.

Refinancing your mortgage can be a complex process and it is advisable to read the fine print, and consult an expert advisor for complete information about the terms and conditions before you go ahead.