Though it can be a great tool when used in the right circumstances, refinancing a mortgage is sometimes viewed suspiciously by some people. The fact that a mortgage is looked at as a ‘long term burden’ might make you think that refinancing it only serves to make it worse. However, with financial prudence, you can use mortgage refinancing as a tool to sort out your financial life, and to also bolster other aspects of your life as well. The common reasons why you might want to refinance your mortgage include:
To lower your interest rates
There are times when interest rates are very low. You can use this to reduce the interest you pay on debts including credit cards and mortgages. If you had bought your house at a time when the interest rates were very high and have dropped, you can take advantage of this. Refinancing your mortgage means that you will end up servicing your mortgage at lower interest rates. Of course, this translates to higher savings. However, you need to keep an eye of the technicalities of refinancing in such cases. Work with a professional who will help you refinance your mortgage without having to pay too many hidden fees, and without value for money.
Reduced payments on your mortgage
Mortgages tend to be long term commitments, sometimes lasting up to thirty years. During this time, anything can change. You might have gotten a few more kids and had a few more commitments. If your income has not increased in a commensurate manner, this will either lead to reduced quality of life, or increased debt. Refinancing when interest rates are low means that you will pay less each month to service the mortgage. You could either use this to cover the other commitments, or save the money. Mortgage refinancing resulting in lower monthly payment costs can be a tricky affair. You may need a professional to help you navigate issues such as finding the best refinancing terms, as well as effective negotiations.
Moving from an adjustable to a fixed rate mortgage
Mortgage interest can be paid as fixed rate and adjustable, and each of these has its pros and cons. When interest rates are low, you could try to secure your future by changing your mortgage from an adjustable to a fixed rate mortgage. The mortgage interest rates will be tied to the prevailing interest rates, which are low. In case of any issue resulting in increasing interest rates in future, you will be covered since your mortgage interest rates will be low.
Reduce your mortgage duration
Mortgage durations last long, some as much as thirty years. When interest rates are high, most people prefer longer duration interest rates in order to minimize monthly payments. This in turn results in being in a better position to service the loan without default. However, if the interest rate significantly reduces, this might be an opportunity to cut down on the mortgage duration. This is especially so if you also have the interest rate fixed to the current low interest rate. A shorter duration in mortgage payment is attractive since it means that the house will be yours sooner rather than later.
These are some of the reasons why you should consider Mississauga mortgage refinancing. However, remember that mortgage refinancing is a doubled edged sword and if not used right could result in financial ruin including losing the house. Always be careful about your intentions, and consult a professional to guide you through the process of refinancing. This way, it can be a powerful tool to facilitate financial freedom. Many who do it right swear by it, and consider it one of the best financial decisions they have ever made in their lives.