Refinancing a mortgage is a good alternative to other borrowing options, such as lines of credit and other loans. You can refinance your mortgage as many times as you need. With that said the lender you want to use may only allow a certain number of refinances or a specific credit score minimum to proceed. Talk to different lenders and see what their requirements are for getting mortgage refinancing.
Is It Bad to Refinance Your Home Multiple Times?
Refinancing your home multiple times within a short period can hurt your credit score. Credit bureaus, the organizations that create and track your credit score, may lower your score if they notice frequent credit applications from multiple lenders. This pattern suggests that you are low on funds and may be a higher credit risk. To minimize this impact, try to apply to one lender at a time.
Disadvantages
In addition to potentially lowering your credit score, refinancing your mortgage comes with costs and time requirements that vary by lender. Some of these costs may include:
- Prepayment Fees: Up-front fees that can be significant, which may challenge your short-term financial management.
- Property Appraisal Fees: The cost of a new property evaluation or appraisal.
- Legal Fees: Costs associated with registering the refinancing.
When Should You Refinance a Mortgage?
There are three main reasons why most people refinance their mortgage:
- Lower Monthly Interest Rate: Consider refinancing if interest rates are significantly lower than when you first got your mortgage. This can be very beneficial, especially if you have a large remaining debt.
- Access Your Home Equity: Refinancing can provide the capital you need if you’re low on funds. Lenders may allow you to borrow up to 80% of your property’s equity. For example, with $1,000,000 in home equity, you could receive up to $800,000 through refinancing.
- Consolidate Debt: Refinancing can help consolidate and pay off outstanding debts. This approach simplifies your finances by combining multiple payments into one, potentially with a lower interest rate.
How to Tell If Refinancing Your Mortgage Will Save You Money
- Review Your Current Interest Rate: Refinancing at a lower interest rate can reduce your monthly payments if your current rate is higher than current offerings.
- Consider Associated Fees: Discuss with potential lenders the fees and penalties involved in refinancing. These fees might affect your initial monthly payments, but the long-term savings from a lower interest rate could outweigh these initial costs.
Mortgage loans generally have lower interest rates than credit cards and other loans because they are secured by your home’s equity. Using a refinanced mortgage to pay off high-interest credit card debt can save you money by reducing your overall interest payments.
Mortgage refinancing is a great way to tap into your home equity and potentially lower your monthly payments. It can provide the flexibility to consolidate debt, manage unexpected expenses, or even fund home renovations.
Mortgage Broker Store
In seconds, you can find out how much equity you have and how you can use it to your advantage. Discover what to expect from mortgage refinancing, Ontario lenders of all sizes, and if it’s right for you. Get in touch with us today to learn more. Email ron@mortgagebrokerstore.com or call 416-499-2122.
