If you’ve been thinking about your monthly debts or mortgage payments lately, it may be time to refinance your mortgage. Rates are low and Edmonton is a booming market so home values are up a bit. If you’re unsure if it’s worth it to revamp your current mortgage, a review of your existing mortgage details could be warranted. Answer the questions below to determine if you should consult a mortgage professional about moving onto the next step in refinancing your current mortgage.
1. Is your mortgage up for renewal in the next 2 to 3 years?
If you’re about halfway into your mortgage term, it may be good idea to start thinking ahead. There have been rumblings of rate increases for a while now and no one is sure exactly when a continuing increase will begin, but we all know ones coming. What I can say for sure is rates are not likely to go down any further, so if you were thinking you may break your term early anyways for one reason or another, I say look at your options sooner than later if your goal is to save money. You may be looking at refinancing to access some of your home equity, consolidate debts or if you’re payment sensitive and just can’t afford a payment increase due to potential rising rates, you may want to speak with a mortgage professional now to explore your options. It could make sense for your existing lender to do an early renewal if you are close to your renewal date or a blend and extend now versus waiting for your renewal date when the rates could be higher than they are now. Doesn’t hurt to get a second opinion from other mortgage professionals if you are thinking of making a major decision about your finances.
2. Are you planning on starting your own business anytime soon?
It’s much more difficult to qualify for a mortgage if you are newly self-employed so if you are planning on making some changes to your mortgage, you may want to take action soon while you are still an employee who can provide third party income confirmation. Accessing unused equity to use as a cushion while building your business or restructuring your mortgage to lower payments could make sense, however, be aware that refinancing can come with some costs. If you are unable to make changes to your mortgage due to your employment situation, talk to a mortgage broker who can offer other financing alternatives for the self-employed borrower.
3. Your Home Equity Line of Credit balance hasn’t decreased
If you have a HELOC and the balance isn’t going down as fast as you’d like, have you considered converting your revolving credit line into a fixed rate mortgage term while fixed rates are still relatively quite low? This will help by implementing a structured pay down of the debt with a fixed payment schedule. The fixed rate for a 5-year term is actually lower than the best advertised rate for a Home Equity Line of Credit these days.
4. Do you owe more than your home is worth?
Even with the many new mortgage rules coming into effect over the past 5 years you still have mortgage options if you’re a bit over-leveraged. This type of scenario usually involves a more in-depth consultation before a mortgage solution that suits you can be determined, however, there are a few possible avenues that can be taken and it’s important to start on the right path sooner than later.
5. Has your credit score increased?
If you originally got a mortgage when your credit report was showing derogatory ratings and as a result you are paying a higher interest rate, a mortgage refinance could be right up your alley. If you’ve improved a poor credit score enough to qualify for a lower interest rate, you could be saving money every month! Time to contact a mortgage professional for some valuable advice about moving to a prime lender for a lower interest rate and monthly payment.
6. Are you moving soon?
Most mortgages are portable, which means you can take the existing mortgage term to the new home you buy so don’t let a potential move prevent you from taking advantage of today’s longer fixed or variable rate terms. There are some guidelines that determine portability eligibility and it’s important to read the fine print on your mortgage commitment to determine what requirements you must meet in order to bring your great rate with you to the new place.
Some of the above items may lead to questions about possible payout penalties and the actual benefit of the above mortgage solutions. An experienced mortgage professional should be able to provide you with an amortization scenario taking into consideration a potential payout penalty to break your term and determining if it is still a financially sound idea to move forward with a mortgage adjustment.
It doesn’t take long to determine if your mortgage is in need of a makeover and if you answered yes to any of the above questions a mortgage consultation makes sense. Ensure you’re aware of what is involved in the process including costs involved and documents required and if you’re unsure of anything, don’t be afraid to ask questions as a check-up is the perfect time to get the answers you’re looking for.