A mortgage refinance serves as a new mortgage on your property. You will essentially be using a new mortgage in order to pay out your current mortgage. The new mortgage can be provided by your current lender, or you can switch to another lender if you prefer.
A mortgage refinance serves as a restart of sorts, so you may want to obtain one if there are benefits to doing so. For instance, a mortgage refinance may allow you to stretch out the amortization in order to reduce your monthly payments.
You can opt to shorten it in order to increase the payments if your financial situation has improved in recent months. You can also switch from a variable to a fixed-rate mortgage, or vice versa, by refinancing your mortgage.
From the mortgage amount to the mortgage terms, refinancing your mortgage may allow you to benefit if the new terms are favourable compared to the previous terms. Below, we will focus on refinancing tips that will save you time and money.
Tip #1: Have a Definitive Reason for Why You Need to Refinance
You need to first sit down with your family and determine why you need to refinance. For example, you may be interested in paying off your loan faster if you have recently gotten a great new job or promotion.
Conversely, if you have recently been laid off or demoted, then you may need to lower your monthly payments. Recent market changes may also allow you to lock in a lower interest rate if you opt to refinance your mortgage.
Moreover, if you took out mortgage insurance in order to qualify for your first mortgage, then you may be able to eliminate it by refinancing your mortgage. It is also possible to obtain a cash-out refinance with some providers.
Tip #2: Remove Errors on Your Credit Report
If you want to save a large sum of money on your refinance, then you need to remove all of the errors on your credit report.
Some common credit reporting errors to look for include duplicated negative marks, inaccurate personal information, bad debts, and accounts that are listed as “closed by the lender.”
Tip #3: Make Sure You Have Enough Home Equity
Before you take the next step, you need to have sufficient equity to qualify for a refinance mortgage. Generally speaking, the minimum equity amount needed to qualify for a mortgage refinance is 20%, but some lenders may be more lenient.
Tip #4: Compare Your Options
You need to compare and contrast all of the options that are available to you before you make your final decision. An online platform can be used to streamline the process. It will take care of all of the calculations so that you don’t have to.
Your specific requirements will be calculated and then compared to all of the mortgage providers in their database. You can then contact the lender or lenders that will be able to accommodate all of your needs.
Tip #5: Improve Your Credit Score
It is imperative that you have a good credit score in order to qualify for a refinance. Indeed, the higher your credit score is, the better your mortgage refinance rate will be, as you will be seen as a lower risk. A good credit score is considered a rating of 600 (out of 900) or higher.
Tip #6: Closing Costs
You need to also anticipate what your closing costs will be so that you can save up the necessary money. Paying upfront will save you headaches and time that can make your life a lot easier.
Tip #7: Lock Down Your Interest Rate
Interest rates will go up and down over the years according to changes in the market. If you are able to find an interest rate that seems favourable, then you should lock it down in order to reap the rewards and enjoy peace of mind.
Otherwise, you may end up taking a gamble that may come back to haunt you in the future when you least expect it.
Tip #8: Home Appraisal
The final tip is to get your home prepared for the home appraisal process. Making valuable upgrades or additions to your home via a home renovation project can increase the curb appeal and real estate value of your property.
You should also keep track of all of your upgrades so that you will be ready when the home appraisal process begins.
The tips that we have provided should save you time and money so that you will be better prepared than you were during your initial mortgage application. It should also be noted that the company that offers the lowest rate may not be the best option for you.
In sum, the new mortgage needs to meet all of your needs, both short and long-term, and must not include any hidden fees.
Refinance a Mortgage in Canada: The Ultimate Guide 2021 (altrua.ca)