What is a mortgage refinance, and how does refinancing work?

Refinancing a mortgage doesn’t have to be confusing or stressful. If your mortgage loan is coming up for renewal, you may have the option to refinance. Mortgage brokers, like One Mortgage Group, can explain the details of refinancing, but here is some information you may find helpful.

What is Refinancing?

Refinancing is when a mortgage loan is renegotiated to have new terms, replacing the original loan. This usually is done to improve the borrower’s finances by having lower payments. Refinancing gives you a chance for more prepayment options, shorter terms, and lower interest rates.

When Should I Refinance?

The easiest time to refinance is when your mortgage loan is up for renewal. Although you can refinance as often as you wish, you need to wait six to seven months between refinancing.

If you don’t plan on keeping the home or staying there very long, it’s not the best time to refinance. If you plan on staying in the home for at least five years, however, it may be a good idea. You still need to have good credit, because you still need to qualify for a refinancing loan.

What can Refinancing do?

When you refinance a mortgage, it lowers your monthly payments, pays off other loans, debts and saves you interest. You can arrange your mortgage so you can use your home’s equity to pay for things like education, renovations, or even medical expenses.

Can Refinancing Save you Money?

Here are three simple ways Refinancing can save you money.

• By renegotiating for a mortgage with improved prepayment options, you can pay off your home quicker.
• Getting a fixed-rate mortgage will help protect you if interest rates fluctuate. If your house is almost paid for and rates fall, however, switching from a fixed to variable can help. Your mortgage broker in Toronto, such as One Mortgage Group, will be able to advise you as to what would be better in your situation. Fixed-rate mortgages usually help your finances and save you money by allowing you to budget better.
• Lower interest rates can help you pay more on your monthly principle.

Keep in mind, your credit score still matters at this time. When in the process of refinancing, check your credit score and make sure everything is correct. If you notice any errors, take care of them right away. Make a plan as to what you are going to do with the money you save. You don’t want to spend everything you save.

So when your mortgage term nears the end of its term, think about refinancing. If refinance mortgage in Toronto sounds like the right option for you, contact your One Mortgage Group broker. We can help guide you through the process.