When Is An Ideal Time To Consider Mortgage Refinance?

Many homeowners are considering mortgage refinancing today to take advantage of the low interest rates. The main reason for this is because home refinancing can lead to significant cost savings, but a homeowner has some key factors to ponder over before deciding whether it is the right time to make the move. Time is of essence if you are thinking of refinancing. We have provided a guide through the process and help you decide when it’s the right time to refinance. The following are a few tips to get you started.

Compare your interest rate to current rates

Refinancing will only benefit you if you sign up for lower interest rates than the one you are currently paying. This way, you will save tremendously on your monthly payments. Before refinancing, compare the current mortgage rates in Montreal to the rates you are paying. If you find that there is a significant drop, then it is worth considering refinancing.

How long you will live in your house

When you decide to refinance, a closing fee is charged on your new mortgage. It makes financial sense to refinance your mortgage only if you know you will live long enough for the savings from the new mortgage to equate the fees. If you plan to sell your house soon, refinancing will not be the best decision to make.

Look out for penalties

Some mortgage loan requirements include a penalty if a homeowner pays off the loan before a set time. This means that when you decide to refinance, you may be forced to pay thousands of dollars for paying off your mortgage early. Add the penalty to the cost of refinancing and you will find that it is not worth making the move. However, if you are planning to stay in your house for a long time, you can calculate how much time you need to pay off the prepayment penalty using your new savings.

Job security

The other factor you have to consider before refinancing is your job security. How reliable and steady is your income source? Most lenders will consider refinancing borrowers who have a steady job than those without. The lenders will check if you have been holding the same job for the last one year before they decide to refinance your mortgage. They consider borrowers with a steady income source as low-risk.

On the other hand, if you are faced with unexpected expenses or lose your income that will mean that your finances will be constrained. You may think that refinancing will help you cut down costs but in this case, your income change will inhibit your borrowing capacity. Refinancing when you don’t have a steady income will not be a wise move especially during times of uncertainty.

Lifestyle change

If you are planning on changing your lifestyle, let’s say start a family or remodel your house, you may want to start thinking of how to cut down your current costs to make these changes affordable. As mentioned earlier, refinancing helps a home owner to save a significant amount of money when they sign up for lower interest rates than they were paying initially. You may find that your existing mortgage is not as useful and you may want to prioritize new features and take advantage of low variable rates.

The cost of refinancing

Calculate the cost of refinancing to help you decide whether it is the right time to switch lenders. Account for the charges that your current lender will need for discharge fees as well any upfront application fees you will be charged by your new lender to see if the move is worth it. It is advisable to take time to weigh up the risks involved and the benefits of refinancing. You can seek the advice of a professional to help you decide if your timing is right to make your refinancing application.

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