Is a Mortgage Refinance right for you?
The benefits of a mortgage refinance can be many – pay off high interest debt and increase your cash flow allowing you to save for retirement or pay off your mortgage faster; access the equity in your home while locking in to a lower interest rate, make home improvements and increase the value and comfort in your home, pay for college or take advantage of investment opportunities. We can often refinance your Kamloops home with very little increase to your current mortgage payments but it can have a huge impact on your cashflow or net worth.
A mortgage refinance (accessing the equity in your home) can be tricky to navigate on your own. You want to ensure you get the highest value appraisal for your home which won’t always happen if you just walk into your bank. You also want to chose the mortgage product that is going to set you up for interest savings and minimize any penalty exposure.
How Can I Help?:
1. Provide an estimate of your home’s value when submitting your application to a Lender that may allow us to skip a formal appraisal.
2. Shop multiple Lenders (Big Banks, Credit Unions & Mortgage Only Lenders) that will ensure we get the best rate and product for your needs.
3. Advise on payment amounts and amortization that will save you the most interest and align with your family’s unique goals.
4. Potentially choose a Lender that will offer a “free legal package” and minimize any costs that will apply to your refinance.
5. Analyze whether or not it makes sense to pay a penalty and switch Mortgage Lenders to maximize interest savings.
Mortgage Refinance Available Products are many:
1. Home Equity Line of Credit
a. Pros – re-advanceable and interest only applies to the money you actually borrow from the line of credit. Interest only payment are required, can keep cash flow to maximum – simple vs. compounding interest, no limit on pre-payment amounts & can be paid off in full at any time.
b. Cons – comes with a higher interest rate – Prime +.50% or +1.00%., only 65% of the value of the home can be placed in a HELOC.
2. Variable Interest Rate Mortgage
a. Pros– can apply to 80% of the value of the home, comes with a low interest rate, a discount off of the prime rate, 3 month interest payment penalty to pay in full in almost all cases, great prepayment options.
b. Cons – when prime rate raises so does your interest rate and consequently your payment or if the payment amount doesn’t get adjusted by the Lender, more money goes to interest than to your principal.
3. Fixed Interest Rate
a. Pros – can apply to 80% of the value of the home, comes with a fixed interest rate that can’t change for the term of the mortgage, great prepayment options.
b. Cons – Can be subject to a large IRD penalty if the mortgage is broken before the end of the term, you can be locked into a higher rate if interest rates drop.
4. Hybrid Mortgage – combine all three of above. Have a portion of your mortgage in a fixed rate, a portion in a variable rate and a portion in a revolving line of credit.
a. Pros– a portion can be in a HELOC which is re-advanceable and you are only paying interest on the money you actually use, helps to minimize penalty (amount in a HELOC not to exceed 65%), take advantage of low variable interest rates and hedge your interest rate bets with portion in a fixed rate as well.
b. Cons – IRD penalty will apply to any portion in a fixed rate. Not all Lenders offer a HELOC of Hybrid type product. Most common with Banks and Credit Unions.
Contact Karen today to discuss your refinance options.