Refinancing is a scary thing, but it doesn’t need to be, and it can save you a ton of money. Basically, when you refinance, you replace your current mortgage with a new one, with a possible lower interest rate. A lower interest rate can save you money and can help you pay off your mortgage faster. Plus, through a refinance you can also access up to 80% of your home’s value, less the outstanding balance of your mortgage.
$300,000.00 x 80% – $200,000.00 =. $40,000.00
(home value) (max loan-to-value ratio) (max loan-to-value ratio) (available equity)
Now, interest rates change depending on market conditions and on your credit score. So, if you bought a house with so-so credit when interest rates were high and now you have an amazing credit score, you’re a great candidate to refinance for a lowered interest rate. When it comes to deciding to refinance or not, the general rule is that if you can lower your interest rate by 0.75% or more, you should refinance. There are several online calculators that will help you estimate how much your refinance rate could be that are worth checking out.
But be aware that refinancing is not a free process. There are several moving parts—from an appraisal on your home, to lender fees, to legal costs, and the possibility of a mortgage prepayment penalty. If you’re interested in refinancing, first check your credit score. If it’s great (in the 620-800 range), then you’re good to move ahead. If it needs a little TLC, work on paying down your debt and making payments on time. Your credit is a big factor in getting a good interest rate, so you’ll want to get it as healthy as possible.
Once you’re ready to start the refinance process, talk with your current lender and see what they can do for you. Once you have their offer, meet with a few other lenders to see if they can do any better. As soon as you find the best offer (aka lowest interest rate), lock in the offer, so the interest rate doesn’t have a chance to increase. *Remember if you are switching lenders there may be a discharge fee ranging from $0 – $400, depending on the province your in and the lender you’re currently with.*
When you refinance your mortgage, you’ll need to consult with a real estate lawyer. Your lawyer will review your mortgage loan, its terms/ conditions, register the new mortgage, and conduct a title search to make sure no leans have been made against your property. It’s the lawyer’s job to facilitate the entire financial transaction between you and the lender. Legal fees for a refinance typically range between $700 and $1,000.
If you’re switching lenders, and your mortgage balance is greater than $200,000, your new lender may pay your legal fees for you. So, before you know it, you could have a new mortgage and a lower interest rate.
Have any questions about refinancing or want connections to a great lender? Just call me or reply to this email.