Refinancing a mortgage is an important aspect for homeowners to consider. Essentially, you pay off the full amount of your initial mortgage and take out an entirely new loan, which may allow you to receive much more favourable loan terms and interest rates when compared to what you initially got. There are many benefits that come with refinancing, including debt consolidation and access to your home equity. In this blog, we are going to present a step-by-step guide to the refinancing process.
The first and most important step is to compare your mortgage terms and conditions against the market rate in your particular area. Refinancing is a time-sensitive initiative, and you need to ensure the circumstances are in your favour.
Start the Application
Just like the first time, you will need to apply for a new mortgage to begin your refinancing. Here, you can either go to a lending institution or a mortgage broker, either of which will help compile the relevant documentation and submit your application.
Refinancing gives you the benefit of experience, and you can more carefully research the types of mortgage you want—which depends on your finances and goals. Whether fixed-rate, adjustable-rate or combination-rate mortgages, you need to give due consideration to each before proceeding.
To submit a complete application, you will need to collect all the relevant documentation which usually include pay stubs from your work and tax documentation. Your mortgage broker or bank will clarify all that is needed.
Even if the market conditions are perfect, there still might be fees or costs incurred during the process which could cut into your margins. As a rule of thumb, when securing a decreased interest rate, you should aim for at least a half-percent reduction.
At the end of the day, it all comes down to research, market awareness and the flexibility you have in terms of finances. Speak to a mortgage broker or your local bank for detailed information into the process and what all it entails.