By Sean Cooper
After mortgage rates had been on the rise for the last year or so, mortgage rates are dipping. Low mortgage rates aren’t just a boon for first-time homebuyers; they’re a boon for existing homeowners! If your mortgage is coming up for renewal in the not too distant future, you can take advantage of today’s low mortgage rates. But that’s not the only way to benefit. Even if your mortgage isn’t coming up for renewal, it might make sense to refinance your mortgage. Here are three instances when refinancing your mortgage might make sense.
Consolidating debt
Sometimes life happens. Your car breaks down or your roof starts to leak. Sometimes it can be even more costly. Your basement might need waterproofing. Unless you have emergency savings, you’ll more than likely have to rely on your credit card. With most credit card interest rates at 19% or higher, it can be quite costly, especially if it’s going to take you several months or years to pay off the debt. Why not instead roll that debt into your mortgage? When you consolidate debt, you can take advantage of today’s low mortgage rates by using them towards your consumer debt. Not only can you save on interest, but you can also be debt free sooner. What’s not to love?
Taking advantage of low mortgage rates
Did you sign up for your mortgage when mortgage rates were a lot higher? Then it might make sense to refinance. Likewise, even if you have a variable rate mortgage, it might make sense to refinance. It’s worth shopping around and seeing if you can get a bigger discount off prime rate. The discount off prime rate you received from your lender depends on the lender and where rates were at the time. If it makes sense to stay put with your lender, then there’s no harm, no foul, but if you could save money by moving to another lender, would you be open to it?
Changing your amortization period
When you signed up for your mortgage, did you choose a shorter amortization period than you had to? If you’re looking to buy another property, a shorter amortization period can make it tougher to qualify for a mortgage. The higher mortgage payments coupled with the mortgage stress test may mean that you don’t qualify to spend as much on an investment property as you hoped (or you might not qualify at all). By lengthening your amortization period, you can have more options in terms of investing in real estate.
The costs of refinancing
Before refinancing your mortgage, it’s important to be aware that there may be costs. You may be required to pay a mortgage penalty with your existing lender. You might also be required to pay mortgage transfer fees and an appraisal fee, although some lenders will cover that or let you capitalize that into your mortgage. It really pays to shop around if your refinancing and get a mortgage professional to crunch the numbers since the savings might not be so obvious on first glance.
