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should you refinance

Should you refinance your mortgage? Time to find out

Should you refinance your mortgage as we approach the fall season? A refinance can have several potential benefits, but it can also have some risks if it’s not the right move for you. We’re here to chat about whether or not refinancing is a good idea for you right now. You will need to think about your own needs as well as interest rates, debt, and your future plans. Let’s jump right in!

How have your needs changed?

When you signed your mortgage contract, you may have been a brand-new home owner with very different needs than you have today. This is normal! Just like our career and personal needs change over time, it makes sense for your mortgage to evolve too. If your mortgage doesn’t feel right for you anymore, you’re right to think about making a change. Maybe you’re in a place where you think you can start making bigger mortgage payments, or paying more often. Perhaps you want to shorten or lengthen your amortization period. People often find they want to find ways to pay off their mortgage faster without being penalized for it, and that might involve a refinance.

What are your future plans?

It’s important to think about your plans for the future if you’re considering a refinance. A refinance can be good if it coincides with the timing of a big home renovation, for example. Home renovations are expensive, especially today with high demand and longer wait times for contractors and materials. If you can access some of your home’s equity to pay for this project, why not? The increased cash flow will be a nice boost for you. 

On the other hand, should you refinance if you think you’ll be moving to a new home next year? A refinance is a big process. It involves breaking your current terms, and setting up a new contract. Breaking your terms will involve penalties you have to pay. For someone who plans to stay in their home long-term, the benefits of a refinance, like paying off your mortgage faster or securing a lower interest rate, are worth these penalties. However, if you decide to move one year after refinancing, you will not have experienced the benefits of a refinance before you need to pay to break your terms again. In this situation, a refinance will cost you more than you can save.

Consider today’s interest rates

Obviously, interest rates today are a different story than they were last fall. With the most recent rate hike on September 7, the overnight rate now sits at 3.25 per cent. If you hold a variable rate, you may be thinking you’re in a bad spot, especially since fixed rates have started to fall in anticipation of a possible recession. The thing is, if we do hit a recession, variable rates will fall once again, and if you’re locked into a fixed rate by that time, you won’t benefit from the rate drops. Plus, interest rates are still fairly low compared to history, even if they seem much higher than what we have gotten used to. 

In general, we don’t recommend refinancing to lock into a fixed rate. However, if you have a need that isn’t about rates, that’s a different story. Maybe you want to keep your mortgage type and rate, and just want to adjust a different part of your contract. Refinancing shouldn’t be all about rates! Consider your personal mortgage needs too.

Thinking about debt consolidation?

Debt consolidation can be a scary, but sometimes necessary, part of being a home owner. The good news is if you’ve lived in your home long enough, you may have built enough equity that you can access that equity and use it to handle your debt. By consolidating your debt, you are combining all your debts into one lump sum payment, all with the same interest rate. This rate is often lower than the ones you were working with before. This means you will owe less each month, and you can keep track of your debts more easily. Less interest means more money saved that you can use to deal with debt. Debt consolidation may hurt your credit short-term, but it can help you in the long run by getting your mortgage back on track.

Get in touch with us

If you’re thinking about a refinance, it’s important to reach out to a broker first. We can help you see if a refinance is right for you, and what interest rate you may be able to secure. You can also discuss the benefits and risks of refinancing with a mortgage professional who has your best interests in mind.

Don’t make the decision to refinance alone. Contact a mortgage broker to make sure it’s the right move for you, and let us guide you through the process! We will help you find the right product, at the right time.

If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.

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