How Long Before Your Mortgage Renewal Date Can You Renew Your Mortgage?
With mortgage rates at an all-time low, properties have built up a lot of equity all over the country. This is why 2022 is the time to unearth your equity with a mortgage refinance. When you are looking to refinance your mortgage, you must keep in mind:
- If you are looking to save on interest costs
- Are you looking to improve your cash flow
- Consolidate debt
- Need refinancing to renovate or remodel your home
- Invest in property in new property
- Or all of the above?
With years of experience in the mortgage industry, Matrix Mortgage Global has worked on hundreds of mortgage refinancing transactions to get their clients the best mortgage refinancing solutions possible. For most individuals, refinancing their mortgage is a way for them to save money and simplify the process of paying off their homes. Having said that, refinancing your mortgage is not always the correct decision. To help you paint a clear picture of if refinancing your mortgage can help you out in 2022, you should ask yourself the below-mentioned questions:
- Will refinancing reduce your mortgage interest rate?
The most important objective of mortgage refinancing is to save money on your debt payoff. The ideal way to reduce the cost of borrowing is by lowering your interest rate. If you are not able to qualify for a loan at a lower interest rate than what you are currently on. It makes no sense to refinance your mortgage. Why would you want to pay a new lender more than what you are currently paying? There is one exception, however, if you have opted for an adjustable-rate mortgage (ARM) and you are concerned the interest rates will rise over time, the best option would be to refinance to a fixed-rate mortgage, however, it may cost you a little more in the short term.
- Will you be able to cover the closing costs of refinancing?
Remember, when you refinance your mortgage, you have to pay closing costs too. This could be between 2% to 5% of the amount you are borrowing. This means, in addition to paying interest on the mortgage, you will also end up shelling out several thousands of dollars worth of upfront fees. If you are finding it difficult to pay the closing costs, you may want to reconsider refinancing until you can.
- How long would you take to play on your current loan vs the new one?
Essentially, refinancing means getting a new loan. For example, if you have a 30-year loan and you’ve been paying it off for 10 years, you have 20 years left to pay back the outstanding balance. If you refinance into a 30-year loan, you have added 10 years to the existing loan. However, if you have a short time left to pay back your loan, opting for a mortgage refinance is not the best option.
- If you are planning to move soon
Because of the upfront costs of refinancing, it can take time for the savings to make up for the initial expenses you’ll pay. If you are considering moving soon, then it may not be smart to refinance as you may not live in the property long enough to accrue any savings after factoring in closing costs.
Mortgage refinancing is still attractive in 2022
Let’s assume you bought a house for $500,000 three years ago and have taken a mortgage of $450,000 with an interest rate of 3%; it is a great deal. Now if you refinance your mortgage, you will likely be paying an interest rate of 2% which will make you end up saving a lot of money in subsequent years. Keep in mind, the interest rates today won’t be the same in the coming years, so refinance today, and reap the benefits of tomorrow. Instead of making plans for the future markets, let’s plan for the present. You do not want to regret missing out on saving $5,000 or $10,000 over the next couple of years.
Refinance – more than saving money on your mortgage
While paying a lesser interest amount, you can own your home sooner. It is one of the most significant draws of a mortgage refinance. The price of real estate in Canada has risen quickly in the past year, making it a valuable financial asset that owners can use as leverage to pay off any outstanding debt or invest in. If you are carrying high-interest debt, a mortgage refinance allows you to take some equity in your home and use it to pay off those balances. Instead of paying around 10% to 20% interest on debt, you will be paying 2.5% associated with the mortgage funds you used to pay it off. Additionally, if you are trying to earn income on your investment, you put in an index fund like an S&P and see a gain of 5% to 10% returns over the next couple of years.
Not many people realize that it is not always necessary or the right time to refinance your mortgage when the rates are low because the penalty to break your mortgage might be much higher. At present, the rates have come down, making it the ideal time to refinance as your penalty might be lower. Your savings will be exponential in the long run.
If you are still unsure about mortgage refinancing, and how beneficial it can be to refinance in 2022, then you should get in touch with the experts at Matrix Mortgage Global to assist and educate you on why mortgage refinancing is a sound financial investment. In addition to offering first-class mortgage refinancing solutions, our insurance brokers also have a wealth of experience and the knowledge to cater to any mortgage need you may have. Whether you have a bad credit score and require a mortgage to purchase a home to get you the best mortgage rates, we’ve got you covered. Please, do not hesitate to reach out to our team today to discuss your specific needs or to schedule an appointment.