We are about 8 weeks now into 2023. This year we are getting more calls than normal regarding rates, cash flow and other non-purchase needs from our clients. Christmas season and the holidays in general the idea of more rate hikes seemed to be less real than it is now. Our clients at Port Credit Mortgages two months in are feeling more and more of the pinch. Here are some reasons you might wish to book a call to go over a refi of your current home.
If the holidays left you with a mountain of credit card debt and less money in your bank account than you’d like, you might consider refinancing.
Reasons to Consider Refinancing after the Holidays
There are many benefits of refinancing after the holidays. Speaking to a Mortgage Broker is a great way to find out if a refi might work well for you. Here’s what to consider when deciding.
Can you get a Better Rate?
If you can secure a better interest rate now, you’ll lower your payment and save money. Not only might your monthly payment decrease, but you’ll save thousands of dollars over the loan’s term.
If you have a prepayment penalty, determine how long it would take you to recoup the costs with your monthly savings. Sometimes it still makes sense to refinance, even with a prepayment penalty. A qualified Mortgage Professional can help you with these calculations.
Do you Have Equity you can Use?
If you have home equity, you might be able to borrow it, using the funds to pay off your debts. Most homeowners can borrow up to 80% of their home’s value, using the difference between their mortgage payoff and the new loan amount to pay off high-interest consumer debts.
Do you Need a Month to Gather More Money?
When you refinance your mortgage, there are usually at least 30 days between closing and your first payment due date. However, this may give you some freedom in your mortgage due dates, allowing you to save more money to make your payment on time as you recover from holiday spending.
Can you Afford a Shorter Term?
You may consider a shorter-term loan if you have more room in your budget for a larger mortgage payment. This enables you to own your home faster and decreases your interest rate. Paying less interest can save you thousands of dollars over the loan’s term, putting more money in your pocket.
When to Consider a Longer Term?
Maybe you don’t have any debts to consolidate but you feel like you’re living paycheque to paycheque. Stretching out your amortization to 25 or 30 years will decrease your mortgage payments and allow for more cash flow. You can use these savings to lower any financial stress you may be feeling and build up a savings account.
What to Consider When Refinancing
Before refinancing your mortgage, here are some considerations:
Is your credit in good shape? You don’t need a perfect credit score, but lenders will pay close attention to your payment history. For example, if you’ve made mortgage payments late recently, they may not lend you more money than you owe.
Do you have a prepayment penalty? Be sure to understand the implications of refinancing. For example, if you’re subject to a penalty if you break your mortgage early, determine the cost and whether it still makes sense to refinance.
Will you use the money saved appropriately? If you refinance and save money, will you allocate the funds to your high-interest credit card debt or spend it irresponsibly? Using the funds appropriately is the only way to ensure you get out of debt and make refinancing work in your favour.
It may make sense to refinance after the holidays if you qualify for an affordable rate and will use the funds properly.
Don’t refinance just to refinance. Instead, have a purpose and a plan, and use it. The key is to use the funds accumulated to get out of debt and help yourself get ahead financially by refinancing.
It won’t solve every homeowner’s problem, and not every homeowner will be eligible, but it may help you start the New Year fresh. If you wish to go over your unsecured debts, value of your home and see if a refi might be a good fit for you. Pleas sent a message to me and we can book a call to go over numbers together.