Mortgage Refinance: What is it?
What is Mortgage Refinance?
When you pay off your exsisting mortgage and replace it with a new one, and new terms. It’s cost-effective and uses your home equity to help pay for renovations or make investments.
1. Low Interest Rates
Replacing your old contract and terms for a lower interest rate will save you money over time.
2. To access Equity in your home
Through refinancing, you can access up to 80% of your home’s value. This can be done through breaking your mortgage, taking on a home equity line of credit or blending/extending your mortgage with your current lender.
3. Consolidate Debt
If there is enough equity in your home, you will be able to pay off high-interest debts through Refinancing. Outstanding debts such as a car loan, line of credit, credit card bills can be consolidated through refinancing.
Process of Refinancing:
1. Break your existing mortgage contract early
In order to get a lower interest rate or get access to equity, you would have to eliminate your current mortgage and get a new one with any lender.
2. Add a line of credit
Through this you get access to the equity at your own will. This means you are responsible for interest only payments, made monthly on the outstanding balance.
3. Blend and extend your existing mortgage
Your existing lender may offer you a “blended rate” which is a combination of your current mortgage rate along with any additional money you borrow at current rates. Blended rates tend to be higher than most competitive mortgage rates.
How much will it cost?
This depends on which strategy you decide to use in order to lower interest rates or access equity in your home. There will be legal costs such as lawyer fees, and if you are breaking your mortgage in the middle of your terms there will be a prepayment penalty.
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