Is there a best time to refinance your home?

As a kid, chances are you had some kind of pet that was your own. Some of us may have had hamsters as our first pet, while others may have had a little goldfish. You begged your parents to let you get a pet of your own. You saved up money in a glass mason jar labeled “Pet Fund.” Every chance you got; you would remind your parents of the benefits of having a pet of your own to look after. When your parents finally gave in, you could practically sit still in anticipation of getting your very own pet. You set up its cage and watched it day and night for a week straight. After the first couple of weeks, the novelty of your little pet wears off. You slowly spend less and less time with it and only do what is necessary to keep it alive. You lose sight of the benefits and skills that you listed off to your parents in order to get a pet.

As home owners, the journey can be similar to the one you went through as a kid getting your first pet. When you first started your journey to homeownership, you saved every penny to afford the down payment. Once you bought your home, you nurtured it and constantly evaluated your finances and mortgage. The novelty wore off over time and you slowly put less effort into the nurturing of your mortgage.

A mortgage should be seen as a living breathing thing – much like your first pet. It should constantly be evaluated to ensure it is working for you. Refinancing can save borrowers time and money over the life of the mortgage. This allows the mortgage to work for you and save you the most money, rather than spending an unnecessary amount of money on interest. With the prime interest rate at 2.45 per cent, home owners should be reevaluating their mortgages to ensure that they are working for them. Here we talk a bit more about whether there is a best time to refinance!

Evaluate your income and employment

While mortgage rates may seem low, refinancing depends on the borrower’s personal circumstances. Lenders look at a borrower’s finances and income when considering them as a candidate for a mortgage. Especially now more than ever, ensuring a borrower is employed and has a steady income is an important qualification for refinancing a mortgage. Lenders are looking for proof of employment upfront from borrowers. They will also evaluate the likelihood of a borrower losing their job in the near future. This is to ensure the lender is not at risk when refinancing a mortgage for a borrower. If a borrower is at risk of losing their job or doesn’t have a steady income, it will be harder for them to refinance their mortgage.

Look at your personal circumstances

Diving deeper into the borrower’s circumstances, it boils down to a few questions you must ask yourself.

1. Lower interest Rate

The first being whether or not you can lower your interest rate. The posted rates of the major banks are higher than the average from a mortgage broker, which makes it important to research your options. If the market rates are lower than what you’re currently paying, it could be time to refinance your mortgage.

2. Shorten the life of the loan

Secondly, see if you are able to shorten the life of your loan. If you are able to refinance your mortgage so that it saves you money and time, it could benefit you. Shortening the life of the mortgage saves the borrower money on interest. The shorter the life of the loan, the less interest you will possibly have to pay.

3. Do the benefits outweigh the costs?

Home owners should also calculate if the benefits of refinancing your mortgage outweigh the costs. When a borrower refinances their mortgage, there are fees for breaking your existing mortgage. You should make sure that the difference between your current mortgage rate and the new one are enough to justify these costs. 

A mortgage should be seen as a living thing, much like your first pet as a kid. Locking it away and neglecting it will limit the savings it can provide you. With the prime interest rate low, and mortgage rates at all-time lows, now is the perfect time to evaluate your finances. Whether or not you should refinance boils down to your personal circumstances. Lenders are strict about the qualifications to refinance in an attempt to lower the risk involved. Calculating the payout of a refinance will also help determine if it is right for you. If it will save you money over the life of the loan, it may be time to consider. When looking at if refinancing is right for you, give us a call at Clinton Wilkins Mortgage Team! You can give us a call at 902-482-2770 or get in touch with us here!