How Refinancing Your Mortgage Can Save You Money

In this era of tight credit and rate-hike cycling by the Bank of Canada, refinancing your mortgage can be a good way to save money. It involves taking out a fresh loan with different terms from your current mortgage. The new loan pays off the balance of your existing private home mortgage loan and offers some rate advantages.

That’s because when you refinance your current mortgage, you can choose a loan with more favorable terms. This could include a lower interest rate or a friendlier repayment schedule. You can also change the type of mortgage from variable to fixed rate. But how does this work, and what are the benefits? Let’s take a closer look.

The Basics of Mortgage Refinancing

Refinancing your mortgage means you essentially replace your current loan with a new one. The new mortgage loan pays off the balance of the previous one, and you begin making payments on the new loan. Even if you refinance mortgage bad credit, you may be able to get a more favorable interest rate or repayment schedule.

How Mortgage Refinancing Works

You always hear about people refinancing their mortgage to consolidate debt or save money, but how does it work? Here are the basics:

1.     Refinancing Your Mortgage Can Lower Your Monthly Payments

The most common reason people refinance home loans is to lower their monthly payments. This is done by either extending the term of the loan or by reducing the interest rate. For example, you have a $200,000 mortgage in Montreal with an interest rate of 5 percent and a term of 30 years. Your monthly payment would be about $1,027.

Now, let’s say you refinance that same mortgage for a new loan with a term of 40 years. Your monthly payments would be reduced to about $775. That’s a savings of over $250 per month.

2. Refinancing Your Mortgage Can Help You Pay Off Your Mortgage Faster

If you want to pay off your mortgage faster, you can refinance for a new loan with a shorter term. For example, you have a $200,000 mortgage with an interest rate of 5 percent in 30 years. Your monthly payment would be about $1,027.

Let’s say you refinance that same mortgage for a new loan with a term of 15 years. Your monthly payments would increase to about $1,454, but you would pay off your mortgage in half the time. Plus, you would save over $60,000 in interest.

3. Refinancing Your Mortgage Can Help You Consolidate Debt

If you have high-interest debt, such as credit card debt, car loans, or student loans, you can use mortgage refinancing to consolidate that debt into one low-interest loan.

For example, if you have a $200,000 mortgage with an interest rate of 5 percent and a term of 30 years. Your monthly payment would be about $1,027.

Let’s say you also have $20,000 in credit card debt with an interest rate of 20 percent. If you consolidate that debt into your mortgage, your monthly payments will increase to about $1,150, but you would save over $4,000 in interest over the life of the loan.

The Benefits of Mortgage Refinancing With Us

North East Real Estate & Mortgage Agency has a team of experienced mortgage refinancing specialists who can help you find the best loan for your needs. Contact us today and learn more about the benefits of our mortgage refinancing services.