1. You want to consolidate your debt
Consumer debt is designed to generate interest revenue for financial institutions through the use of high interest and minimum payments to keep consumers paying for extending periods of time. Once you’re trapped in that cycle, it’s hard to get out. Your minimum payments pay the interest, but pay very little of the principle. And the interest is then calculated based on the principle amount.
With enough equity in your home, you can pay off high interest debt through a mortgage refinance. If you have a number of outstanding debts such as a car loan, line of credit, or credit card bills, you can consolidate this high interest debt through a variety of lower interest refinancing options.
2. You need access to equity in your home
Refinancing your current mortgage allows you to access up to 80% – 85% of your home’s current appraised value less any outstanding mortgages. This can be used for such things as home renovations, investment opportunities, or tuition. You can access this equity through several channels, including breaking your current mortgage, taking on a home equity line of credit or blending and extending your mortgage with your current lender.
3. You wish to take advantage of low interest rates
When you think about it, converting a high interest loan to a lower interest loan just makes sense. Over time, you can save thousands by applying more to your principle and less to interest. Before pursuing this option, be sure to review the numbers thoroughly. Depending on the penalty and the size of your outstanding mortgage, this option may prove to be an excellent financial decision. Penalties for a variable rate mortgage can be three months interest, or a fixed rate mortgage will be the greater of three months interest or an interest rate differential penalty (IRD).
Options for refinancing your mortgage
There are several options available for refinancing a mortgage. These include: breaking your mortgage contract early, taking out a home equity line of credit or blending and extending your mortgage with your current lender.
If you are interested in any of these options or would like more information, contact me, The Mortgage Warrior, for a free consultation