We all have life events or situations that arise in which we need to make changes to our mortgages, whether it’s consolidating debts or possible investment opportunities. When you are breaking the terms of your mortgage for any reason and a penalty applies, this would be considered mortgage refinancing. Although paying a penalty isn’t always the most opportune, the benefits may outweigh the cost.
Why would you consider mortgage refinancing?
- Consolidate Debts – By paying out high-interest debts and moving that debt into your low-interest mortgage payment, you could be saving thousands of dollars. As with high interest credit cards, you can pay an interest-only payment and never be paying down the principal. By having this debt added to your mortgage, you increase your cashflow and credit score while reducing your overall payment.
- Increase Credit Score – If you have completed a refinance to pay out debts, your credit score is going to improve. A lot of times when homebuyers are too extended with consumer debt, it significantly impacts their credit score in a negative way, as it does when they go over 75% of the balance of the card. After paying out the debts, your credit score should improve within a couple of months.
- Investment Opportunities – When your home has ample equity in it, you have the ability to draw out these funds for other possible investments, the most popular of which is to use the funds to buy a rental property. With the ability to pull up to 80% of the home’s value, pulling out 20% for the purchase of a rental isn’t too hard. This should of course only be done if you are able to qualify for the new purchase first.
- Moving B to A – If you have bruised credit or are more extended then you would like to be, sometimes you may need to obtain a “B” mortgage. B mortgages commonly have higher rates with less restrictive lending guidelines. Typically, B mortgages are short terms of 1 to 3 years with the hope of improving the credit or overall situation to be able to go into a standard mortgage with market rates or an “A” mortgage.
There are many reasons why refinancing your mortgage mid-term would be worthwhile, whether it’s to grow your equity within an investment property, consolidate debts, or you are just looking to improve your overall credit position. Reach out to us today at Centum Mortgage Store, Ltd. to get started on your mortgage refinancing!