21 Sep Tips to Avoid Mortgage Refinance Mistakes in Abbotsford
Do You Want to Refinance Your Mortgage in Abbotsford? Refinance mortgage may be a great opportunity for cutting a little interest, using some of the amount in your home value, or changing the terms of your loan. However, there are major mistakes that a lot of homeowners make that can reduce the benefits from refinancing. Therefore, it is very important for you not to fall into costly mistakes and maximize your profits with the right advice.
Satbir Bhullar an experienced mortgage broker near you in Abbotsford knows the subtleties of refinancing will point out possible pitfalls and guide you into the right decisions. Let’s take a look at common pitfalls and how you can avoid them so as to save time and money.
1. Failure to Compare Applicable Mortgage Rates
One of the most general errors homebuyers make is that they do not compare mortgage rates between lenders. Indeed, significant differences exist between rates quoted by banks and mortgage brokers. By agreeing to the first offer, you might end up left with a better alternative that can save thousands over the life of the mortgage.
Tip: Compare as many lenders as possible, including your current bank. Mortgage brokers have access to a greater variety of interest rates across more financial institutions. This will be more likely to help you get the best rate.
2. Missing Fees and Closing Costs
With the fees that come with refinancing a mortgage in Abbotsford, there’s probably much more added on than people care to see. Prepayment penalties for breaking into your old mortgage, appraisal fees, and the closing costs can add up quick. Forgetting these takes all of the financial reasons for refinance right out of homeowners’ pockets.
Facts: In Canadian mortgages, prepayment penalties on fixed-rate mortgages can be several months’ worth of interest payments, depending upon your circumstances.
3. Too Frequent Refinancing
Although refinancing brings with it some immediate benefits, doing it too many times works to defeat the purpose of long-term savings. Every time you refinance, fees crop up and the amortization process has to begin from scratch every time. The more you refinance, the more you reset your mortgage term, making it hard to pay off the principal over the long run.
Case Study: A homeowner in Toronto refinanced three times within five years, once even delaying the length of the mortgage and paying hefty penalties. Although saving a little every month was possible, the total interest paid throughout the mortgage term was much higher than the advantages gained by reducing the monthly payments.
3. Lack of Concentration on Long-term Financial Goals
It should, therefore, align with your long-term financial goals. Planning for retirement, building up a buffer of savings, or working toward your goal of financial independence requires thinking through how refinancing fits into that plan. Now, you may be tempted by a reduced monthly payment amount, but it might just delay your retirement savings or possibly extend mortgage payments into retirement years.
Tip: Check with a financial professional to make sure that refinancing fits with your overall strategy, especially if you’re close to retirement or have other major commitment of funds.
Mortgage Refinance in Canada FAQs
There are few mortgage matters of concern among Canadians, from time to time. Here are some of the most frequently asked ones relating to refinancing mortgages:
- How much equity do I need to refinance?
In Canada, most lenders require you to show that there is at least 20% equity in your home to refinance a mortgage. What this means is equity is the current market value of your home minus the remaining balance you have already paid for with your mortgage. Many lenders can allow you to refinance with less equity, but this may result in even higher interest rates or premium fees for insurance.
- What credit score do I require to refinance my mortgage in Canada?
In Canada, you will need at least a 650 score to qualify for mortgage refinancing, though of course the better your credit, the better you will be likely to get your rates. For instance, while those people with excellent credit tend to be able to qualify for the best interest rates, low scores can make interest rates skyrocket into the stratosphere or even sometimes prevent qualification.
- What time frame is typically involved in refinancing?
In Canada, refinancing would typically take anywhere from 2 to 4 weeks, depending on lender processing times, appraisals, and document submissions. It will help significantly if all necessary documents are prepared ahead of time to minimize delays including proof of income, home valuation, and existing mortgage details.
- Can I refinance with bad credit?
One can undoubtedly get refinancing with bad credit in Abbotsford. However, this is done with some challenges since borrowing with a lower score usually attracts higher interest rates and more rigid requirements. You might even use the mortgage broker to find more flexible lenders, but you’ll need to weigh your priorities with the over-inflated costs.
Conclusion
Mortgage refinancing is a great option for home owners in Abbotsford. It allows them to save or tap into funds accumulated in their houses. To make the most of it, however, there are some mistakes one should avoid-specifically not compare rates, overlooking fees, or refinancing too often. Align any of your refinancing decisions with your larger and more important long-term financial goals, and never be afraid to ask-in this case, if unsure about some part of the process.
If you would like to refinance, contact Satbir Bhullar mortgage broker in Abbotsford, who can provide tailored advice and options. To remain current on the latest mortgage news, follow Satbir Bhullar on Facebook, Instagram and on LinkedIn.