Does it make sense to refinance a second mortgage?
2020-06-25 Jun 25, 2020
You’ve been told you should consider refinancing your second mortgage, but what does it mean and does it make sense for you? Fear not, a second mortgage Toronto broker has all the answers to your questions.
Refinancing your second mortgage essentially means you’ll obtain a new mortgage by trying to lower your monthly costs.
Refinancing your second mortgage is a step you shouldn’t take lightly, so if you’re interested in refinancing, but wondering if it makes sense to do so, read these explanations as to why you should consider it.
Your second mortgage interest rates.
Did you apply for your second mortgage when your credit score was low?
If so, then you may want to consider refinancing your second mortgage. You took out your second mortgage whilst your credit score was poor, and now you’re paying high-interest rates. Since then your credit score has improved and by refinancing you’ll reduce the amount of interest rates you pay.
Sounds great, doesn’t it?
Your second mortgage interest rates are adjustable.
When you first applied for your second mortgage adjustable interest rates were right for you, but now it isn’t. By refinancing your second mortgage, you can switch to a fixed-rate loan where you’ll have more certainty about your future payments!
What’s your financial situation?
Since you applied for your second mortgage your financial situation has changed, which is why you should consider refinancing. You can alter your term payments by refinancing, for instance:
If you’re facing financial hardship, you may want to extend your term and lower your monthly payments, or you want to go for a shorter term and pay a higher amount per month to lower your interest rates. Either way, if your financial situation has changed, consider refinancing your second mortgage so it can benefit you.
Are you looking to make a big purchase?
If you’re looking to make a big purchase, but don’t have the money then refinancing should be something you consider.
So, how does it work?
When refinancing your mortgage, you can do it by taking out equity from your home. In short, this means you can take a large sum of money out from your home if you refinance. Of course, this will all have to be approved by your lender first.
You have debt.
Do you have obligations such as credit cards and want to get rid of high-interest debts?
Refinancing your second mortgage will allow you to consolidate into a low-interest loan, benefiting you in the long run.
How long are you planning to stay in your home?
So, you’re considering refinancing your second mortgage, but how long are you planning to live in your home?
If you’re planning to stay in your home for longer than two years, refinancing your second mortgage would make more sense If not, then you should look at some other options. A private second mortgage may be able to save you costs over the long-run, in the event your pre-payment penalty on your first mortgage is too high.
Now we’ve taken a look at the possible reasons you should consider refinancing your second mortgage, why not talk with your mortgage broker to discuss what steps you should take next?
Remember refinancing your second mortgage isn’t always for everyone, if it benefits your unique circumstances then that’s when you should consider it.