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What Is Mortgage Refinancing?
Canadian Homeowners Can Save Huge Amounts of Cash on Interest Payments Every Month with a Mortgage Backed Loan!
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Mortgage Rates are at all-time lows, so it’s no surprise that refinancing applications have exploded lately. It may be a good time to refinance your mortgage if your lender has a new rate that is much lower than what you’re paying now and you expect to remain in your house for many more years. Your home is a valuable asset and the banks will allow you to borrow against the principal equity you own in your home. This can be released to you in favourable loan terms.
Mortgage Refinancing can also benefit you when you switch providers as most loan providers will calculate the best deal for you, saving you more money in the long term. The current provider you are with may want to make money from you by keeping you locked into a higher rate. Shopping around for better rates is always a good idea.
Furthermore, taking a loan out backed by your home is a much cheaper option than for instance using a credit card or personal loan when you need extra cash.
Mortgage Loans are also an excellent idea if you are planning on renovating your home. The loan will take into consideration the extra value you add to your home through carrying out renovations. This means you will be shoring up your principal whilst being able to borrow at cheaper interest rates. Canadians that renovated their homes in a significant way, for example by building an extension and installing solar panels, were able to see an average of a 15% increase in value. Keep on reading to find more great info on Mortgage Loans.
Mortgage Refinance Can Reduce Your Monthly Payments Considerably and Free Up Needed Funds.
Calculate the portion of your current mortgage payment that is principal and interest (P+I). If your most recent mortgage statement does not include this amount, subtract your monthly escrow payment from your total mortgage payment. Calculate your new mortgage payment if you’re refinancing.
This step is almost certainly taken care of for you if you obtain a refinancing quote from a lender. Additionally, a mortgage calculator can be used to determine your monthly payment. Subtract your prospective new payment from your existing P+I mortgage payment to determine your monthly savings.
Refinancing Can be an Excellent Way to Obtain An Affordable Loan, By Extending Your Mortgage.
When you refinance your mortgage, you will almost certainly be offered a new 30-year loan. Meanwhile, the new mortgage will have a different amortisation schedule.
Assume you’re five years into a $300,000 mortgage at a 4% rate. Your monthly payment for P+I is $1,433, and you owe approximately $271,000 of the initial balance.
Assume you choose to refinance the remaining balance with a new 30-year mortgage at a rate of 3.25 percent plus $3,000 in closing costs. You’ll now pay a monthly P+I payment of $1,180, saving you $253 on your monthly mortgage payments.
Savings Over the Life Span of Your Mortgage Can Be Huge, Refinancing Can Save You Money.
If you keep the original mortgage, you’ll pay $1,433 per month for 25 years, or $429,900 in total. Your monthly payments will be reduced to $1,180 per month for the next 30 years when you refinance. You will pay $427,800 in total, which includes the $3,000 refinancing fee.
Thus, refinancing will save you $2,100 over the life of the loan. It is still the more affordable option, and it may help you save money on a monthly basis. When considering the total payment over the life of the mortgage, the difference in monthly payments does not indicate a sizeable savings.
Time to Shop Around, If Your Current Provider Fails To Deliver The Best Rates Today!
The vast majority of home buyers finance their purchase with a single lender. It could be a bank with which they already do business or an online mortgage lender known for offering competitive rates. Which one, however, offers the most advantageous loan terms? Regrettably, none of these strategies is always the best course of action. That is why it is critical to comparison shop for the best deals.
Mortgage rates are not standardised, which means that while they fluctuate in response to market conditions, each lender sets its own rates and evaluates borrowers on an individual basis. To summarise, two lenders can offer significantly different mortgage APRs to the same consumer.
As a result, it’s a good idea to apply for a mortgage refinance with several different lenders. I typically advise applicants to submit applications to five different lenders, including a large national bank, a community bank, a credit union, and an online-only lender. It will add a few hours to your schedule, but the extra time could result in significant savings.
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