Should you review your budget this season? Here are 5 signs it’s the perfect time to do a budget evaluation.
We recently published a blog post addressing inflation, and how it impacts your mortgage and debt levels. If you missed it, you can read it here. As a brief summary, continued inflation is contributing to interest rate increases for your mortgage. It’s also making goods more expensive, from gas to groceries. Now, we’re here to follow up with a potential option to help home owners navigate this market. It’s time to discuss if it would benefit you to refinance your mortgage.
Is a refinance an option for you?
You may be able to refinance your mortgage to help combat the effects of inflation, but first you need to decide if a refinance is a good option for you right now. To quickly review, a refinance is best suited for home owners who plan to stay in their homes long-term. Refinancing and then moving shortly after will cost you lots of money for breaking your mortgage terms twice, which won’t make the benefits of a refinance worth it. You should also be sure a refinance will give you extra benefits in some way, which we will review below. Refinancing for the sake of it is not worth it, but in the right situation, it can help. How exactly?
How a refinance can help
Many Canadians are feeling the pressure on their finances right now, thanks to interest rate increases and higher prices of consumer goods. If you’re a home owner, by choosing to refinance your mortgage you may be able to bring down your monthly mortgage payments. You might find you can secure a lower interest rate than you had before, or perhaps you can extend your amortization period. A longer amortization period allows you to save money on your monthly payments. For example, a 10 year amortization period on a $320,000 mortgage, at a five per cent interest rate, will result in monthly payments of $3386. By refinancing to a 25 year amortization, this monthly amount lowers to $1861, leaving borrowers with much more breathing room. Once inflation eventually comes back down, borrowers can use lump sum payments to shorten their amortization period once again.
A refinance can also help borrowers who are dealing with other forms of debt. By choosing to refinance their mortgage, borrowers can access their home’s equity and use it to pay off debts such as credit card bills, lines of credit, or car loans. This helps clear out monthly payments and reduces the interest borrowers owe, saving them money in an economy where having extra funds is important. Borrowers can refinance up to 80 per cent the market value of their home, which can be a big boost to their finances right now.
Refinancing your mortgage right now may be a great option for you to help fight inflation in your everyday life. Whether you need help paying off debts, or you want extra savings to deal with the rising costs of goods, a refinance can certainly be useful.
If you’re interested in refinancing your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.