5 Reasons To Consider Refinancing Your Mortgage

Refinancing involves paying off your current mortgage and obtaining a new one with new terms, including a different loan size, interest rate, and amortization period. At any point during the term of your mortgage or at renewal, you have the option to refinance. 

Homeowners typically refinance their mortgage to access equity in their property or to obtain better terms, such as when interest rates drop. When you apply for a refinance, you will have to re-qualify for your mortgage.

Some good reasons to opt for mortgage refinance in Surrey include:

  • You want to benefit from reduced interest rates

Refinancing your mortgage could enable you to save money if interest rates have decreased since you obtained your loan. For instance, the monthly mortgage payment for a $275,000 mortgage with a 6% interest rate is $1,759, and the total interest paid over the course of the five-year term is $77,619 in interest. On the other hand, a 5% interest rate will result in monthly mortgage payments of $1,599, but you will only spend $64,360 in interest over the course of the five-year loan, saving you $13,259.

  • You want to take out a loan against your property’s equity

You might wish to refinance if the value of your house has increased in order to access the additional equity that would only be available upon sale. You would have $300,000 in equity at first if you paid $550,000 for your house and had a $250,000 mortgage. If your home’s worth increases to $700,000 over time, you will have $450,000 in equity. You can access up to 80% of your equity through a refinance, deducting the amount you still owe on your mortgage. 

  • You want to consolidate your debt 

A December 2023 report from Statistics Canada states that the percentage of household credit market debt, which includes consumer credit, mortgage debt, and non-mortgage debt, was 181.6% in the third quarter of 2023. The CMHC points out that although this debt level isn’t at all high; it is one of the highest among G7 households. Because mortgage interest rates are generally lower than those of other loans, it may make sense to use the proceeds of a refinance to pay down high-interest debt.

  • You want to change your mortgage terms

The time it takes to completely pay off your mortgage is known as the amortization period. Your mortgage payments will decrease with a longer amortization term and increase with a shorter amortization period. For mortgages that are insured, the typical amortization time is up to 25 years; for mortgages that are not, it is 30 years. Extending your amortization can help make those payments more bearable if, at renewal, you discover that your interest rate has increased significantly. 

  • You’re going through divorce proceedings

Asset division is a difficult but essential step in the divorce process. If a couple owns a home together, they usually have three options: sell the property and divide the proceeds; keep the property and one of you buys out the other; or keep the property and one of you refinances and leverages the equity to buy out the other.

So, these were some common reasons that points out the need for refinancing mortgage in Surrey. To help you get the most out of your property refinance, rely on a qualified mortgage broker in Surrey. Satbir Bhullar is the name to trust when it comes to mortgage. With years of experience and a wide lender network, I can help you find the best mortgage deal possible.