The Benefits of Refinancing
In our previous article, we explored the expected trends we can foresee in mortgage interest rates within the upcoming year. Due to the effects of the pandemic, rates have been quite volatile lately–however, they have remained consistently low in the past couple of years and will remain relatively low throughout 2022.
Interest rates on mortgages and refinancing have stayed below 4% and we may even see them dip lower. Thus, refinancing in the current market can allow customers to take advantage of really favourable rates and get the most out of their mortgage. By refinancing, you can replace your existing mortgage (which may have an interest rate reflective of pre-pandemic markets) with a mortgage that is much more affordable as it takes advantage of the current low rates.
By reducing the interest rate on your mortgage even by half a percent, your monthly mortgage payments can decrease significantly, potentially saving you hundreds if not thousands of dollars. Taking advantage of the current low rates can make it much easier for you to pay off your loan and even consider investing in another property.
There’s lots of other reasons why refinancing may be right for you, such as:
Paying off your debts and building your credit history. If there are a lot of debts secured through your property, you can reduce those liabilities by paying them off through the equity you’ve built in your home. When applying for the refinance through a bank or lender, they will calculate your loan-to-value ratio, which is essentially your outstanding mortgage balance in relation to the value of your home. If you have at least 20% equity in your home, you may be able to refinance and use that equity to pay off large debts that can affect your credit score.
Investing in properties or consolidating your savings. When you refinance your mortgage for a lower interest rate, your monthly payments decrease. This means every month, you will now have some extra cash left over that you can allocate toward a rainy day fund, savings, or investing. By incorporating that money into stocks or other avenues where it can grow, you can build enough wealth to buy a rental or investment property and start earning passive income. As you trade up with investment properties, you also have the potential for earning capital gains.
Being able to renovate your home and increase its value. When you refinance your home, you can tap into your home equity to renovate your home and further add to its overall value. In a sense, you are reinvesting back into your property. For example, you can renovate your basement into a rental unit, which would allow you to earn rental income as well as increase property value.
These are just some of the different ways you can take advantage of the low interest rates in the housing market right now by refinancing the mortgage on your home. It’s easy to start--get in touch with a mortgage broker to ensure you get the best rates possible!
Read on for more information about daily rates: