With mortgage interest rates being at an all time low, right now is a good time to refinance your mortgage if it’s something you’ve been thinking about. A lot of Canadians are taking advantage of these record low rates and applying for refinancing. There are many reasons to refinance, from renovations to perhaps buying a new luxury boat. However many choose to refinance their mortgage, to pay for their child’s post-secondary education.
When you use the equity you’ve put into your home, you’re turning it into an affordable source for alternative financing.
Should you refinance?
There are some charges that are applied when you take out a new mortgage in order to pull on your home equity. On top of this, you may also have to pay a penalty for breaking your old mortgage however, paying the penalty is usually worth it, when you weigh the difference between mortgage rates and high interest rates on bank loans or a line of credit. In some cases, you may want to draw your kid’s college tuition from another source, but taking a look at your mortgage as an option, is worth your while.
Here are a few factors to consider when you’re deciding whether or not refinancing makes financial sense for you:
1 – How long do you plan to be in your home?
The longer you plan to stay where you are, the more sense it makes to refinance. However you can plan to move. In this case, you just have to ensure that your new mortgage has the option of “porting” to your new home. In other words, you can pack up your mortgage (just like you would your couch or dining suite) and take it with you.
2 – Is there a pre-payment penalty on the mortgage you have right now?
Many mortgage agreements establish a penalty if you decide to pay them off early. This can consist of an outstanding balance, or a few months of interest payments. However, if you are paying a much higher interest rate than you would be on a new mortgage – paying these fees might not be as bad as it sounds at first glance.
3 – What are the costs of the new mortgage?
There are a few fees (appraisal fee, title search fee, legal costs, etc.) associated with the total cost of your new mortgage. It’s best to be aware of all of these costs ahead of time to take them into consideration, before you decide if refinancing is right for you. As your mortgage broker, I can help you make sure that the lender pays for additional costs, or ensure you’ll get your money back in savings in a few months.
You can potentially borrow up to 80% of the appraised value of your home – minus the amount left outstanding on your first mortgage. When you pay off your current loan and replace it with a new one, it can carry you to the goal of providing your child with a post-secondary education. When your kids are ready to leave the nest and move into a dorm room, all of the mortgage payments you’ve been making since they were in diapers, can add up to the equity you need to make their dreams come true – And although there may be a few costs involved up front – You’ll likely find the silver lining, when you think of how much you could be saving in groceries, by having them exploring the world on their own.