When to Consider Port Moody Mortgage Refinancing Options
Refinancing your mortgage can give you more financial benefits and flexibility than most home owners are aware of. It is important that you take the following factors into account when you’re considering whether refinancing your mortgage is right for you or not.
The Types of Mortgage Refinancing
There are 2 main types of refinancing that you can take advantage of:
Rate-and-Term Refinancing: This is designed to save you as much money as possible. You will be refinancing the remaining balance on your mortgage to make sure that you get a low interest rate and an acceptable term for your budget.
Cash-Out Refinancing: With this type of refinancing you will sign up for a mortgage that is higher than the existing one that you have. The difference in price will be given to you in either cash or you can choose to use it to pay off any other debts that you have.
Finding the Break Even Point
The best mathematical way to determine whether refinancing is right for you or not is to calculate your break even point. This is where you can calculate the amount of time that it will take for the refinancing to pay for itself. Many home owners choose to refinance because it can cost thousands to close a mortgage.
The most important part of the break even point is the length of time that you intend on staying in your home. If you find that you intend on keeping your house for less than the amount of time that it would take to break even, it makes sense to just stay with your existing mortgage.
Do You Have Debt?
The largest reason as to why home owners begin to do research into refinancing is because they have accumulated enough debt to where they fear they won’t be able to pay it off in a reasonable amount of time. This is when they start to turn to cash-out refinances. With the money that you get in the difference of the mortgage, you can use it to pay off existing debt that has higher interest rates than your mortgage.
It is important that you consider whether you will have the money to pay off the higher mortgage as defaulting with your payments means that you could lose your home and enter into foreclosure. Whereas missing some payments on your credit card could mean that you get a lower credit score.