Do you want money to buy a big property? Are you looking to change the terms of your loan? Discover with Matrix Mortgage if refinance property or using your own home equity is best for you.
Moreover, if the interest rates have dropped since you signed your mortgage, then considering refinancing is ideal. But there are some factors to bear in mind.
In refinancing your mortgage, you replace your current mortgage with a new one on various terms. In case you qualify, your lender calculates your loan-to-value ratio, which is obtained by dividing the balance owing to your loan and all other debts that are secured by your house into the current value of your home. If the ratio is lower than 80%, then you could refinance.
Additionally, the lender also looks at your monthly income and debt payments. you also have to provide:
1. A copy of your T4 slip
2. Notice of evaluation
3. Recent pay stub
4. Your mortgage statement
5. Current property tax invoice
6. Latest asset statements for your investments
8. Savings accounts
What Is Mortgage Refinance?
A mortgage pre-approval indicates the homebuyer, what value of the property you can easily afford. It also includes mortgage payments related to various purchase prices. It also ensures a mortgage rate for a time period; therefore, protecting you if the rate increases. You are not obliged to the bank or mortgage dealer to whom you received your loan pre-approval, and there are no costs.
What are the benefits of refinancing?
Lower interest rate
If the rates dropped after you obtained your loan, then you are lucky. You can benefit from the reduced interest rates and lower your month-to-month payments just by refinancing your mortgage.
Consolidate your debt
With the lower interest rates, refinancing will help you off excessive interest credit card debt. So when you exchange your current mortgage for a bigger loan and see the difference in cash, it is known as a cash-out refinance. This cash can be used to pay your debts. You want at least 20% equity in your property for a cash-out to refinance.
Methods involved in refinancing your mortgage
There are various options available when you think about a refinance which consist of:
1. Break your mortgage contract early
You will think of breaking your mortgage early if you want to achieve a lower interest fee or access your home equity. In this situation, you put off your present mortgage and take a new one with any lender.
2. Add a home equity line of credit
this gives you access to the equity in your home at your liberty. You are accountable for interest only payments every month on the outstanding balance. You can get access to it through your current lender and a small subset of other lenders.
3. Blend and extend your existing mortgage
Your current lender can also provide you with a ‘blended rate.’ It is basically a ‘blend’ of your present rate along with any extra money you borrow at current market rates. These blended rates are usually higher than the most competitive rates in the market. So ensure you compare the blended rate towards the savings if you break your mortgage.