When is it a Good Idea to Refinance Your Mortgage?

When is it a Good Idea to Refinance Your Mortgage?

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    Published 31/08/2020 11:08 EST

    There are several reasons why you may consider refinancing your mortgage. The most popular ones include taking equity out of your home to consolidate debt, fund renovations, or purchase another property.

    Regardless of why you’d like to tap into your home equity, however, you’ll likely face penalties to refinance before your current mortgage term has expired. And, the more time you have remaining on your current term, the stiffer the fees for breaking your mortgage. That’s why it’s important to look at your payout penalty on your current mortgage and weigh it against the benefits of gaining access to your home’s equity before making a decision.

     

    Key Takeaways
    • There are several reasons why you may consider refinancing your mortgage. The most popular ones include taking equity out of your home to consolidate debt, fund renovations or purchase another property
    • Weigh the pros of the money you can free up through a refinance versus the cons of the penalty you’ll pay to break your mortgage early to make an educated decision on what’s best for you
    • A cash-out refinance is when you’re taking out a new mortgage in a larger amount than the existing loan in order to use some of your home equity

    Is refinancing worth it?

    In many cases, refinancing is definitely worthwhile. If you weigh the pros of the money you can free up to use towards a certain purpose – be it to finance your kid’s schooling or ease your cashflow – versus the cons of the penalty you’ll pay to break your mortgage early, you’ll be able to make an educated decision on what’s best for you.

    Sometimes waiting a little longer – say, closer to the end of your current mortgage term – makes the most sense for your situation. If that’s the case, you know where you stand and can make future plans accordingly. 

     

    👆 Tip

    Sometimes waiting closer to the end of your current mortgage term to refinance makes the most sense for your situation

    How does refinancing work?

    When refinancing a mortgage, you’re taking out a new loan and paying out your existing one. Sometimes people refinance to simply take advantage of a lower interest rate that will pay off over time. In many cases, people refinance to access funds for a specific reason, such as consolidating debt, financing renovations or buying an investment property.

     

    What’s a cash-out mortgage refinance?

    Opting for a cashout refinance means you’re taking out a new mortgage in a larger amount than the existing loan in order to use some of your home equity.

     

    How long does it take to recoup the costs of refinancing?

    There are a number of factors to take into consideration when thinking about recouping costs. See: Here’s how you can benefit from refinancing your mortgage

     

    Here’s an example of a mortgage refinance with a 1,93% rate

     

    How long does it take to refinance a mortgage?

    There’s no set time that it takes to refinance a mortgage. It can range from a couple of weeks to a month or longer depending on the lender and how busy they are at the time you’re looking to refinance. Other factors, such as waiting for an appraisal on your home, may slow down the process.

     

    Important

    The time it takes to refinance can range from a couple of weeks to a month or longer depending on the lender and other factors such as a home appraisal

    When does it make sense to refinance?

    See: Is refinancing worth it?

     

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