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When is the best time to refinance your mortgage? The answer truly depends on you, the borrower. Regardless of how interest rates are performing, or how the market is acting, the most important thing to consider is your own needs. Using this as a guide, you can evaluate your situation to determine whether right now is a good opportunity for you to benefit from a refinance. Here’s what you need to know.
Worried about rising interest rates?
You’re likely not alone if you’re concerned about refinancing while interest rates are on the rise. If you have a variable-rate mortgage, you most likely can’t help but notice that your monthly payments are increasing, and you might be wondering if a fixed-rate mortgage would suit you better during these uncertain times. We strongly advise borrowers with a variable rate to stay put, and not move to a fixed rate. While we know change can be unsettling, fixed rates are actually much higher than variable rates today. Remember, variable rates are rising from the ground up, so they have a long way to go before they catch up to today’s fixed rates. It’s all but certain that fixed rate borrowers have higher interest rates. It’s not the time to refinance to a fixed rate, but it still might be a good opportunity to refinance if you want to update your current variable rate.
Consider your evolving needs
If you think it may be time to refinance, the first thing you should do is think about how your mortgage needs have changed since you first signed your contract. Our mortgage and housing needs are always changing, so it makes sense to update your terms when your current ones do not fit you anymore. Don’t exclusively focus on today’s rates when you make the decision to refinance. Although rates certainly play a role, they are not the entire picture. You also need to focus on yourself and your individual needs. Maybe you’re in a place where you think you want to start paying off your mortgage more quickly, for example. If you need the option for prepayments, or to shorten your amortization period, this is when a refinance comes in handy. Refinancing allows you to change your terms to fit you, whether that means permitting prepayments or shortening your term length so you can pay back your mortgage faster.
Review your financial situation
Have your finances changed considerably since you signed your mortgage contract? Depending on how long ago you got your mortgage, you may have gone through a number of financial changes. For example, many Canadians were hit hard by the pandemic and now find they have a considerable amount of debt to handle. If you dealt with job loss or other financial issues that put you in debt, you might find now is a good time to refinance to get a handle on it. Debt consolidation allows you to combine your debts into one lump sum payment with a lower interest rate, which helps you keep track of your payments and reduce your monthly interest.
You may also want to see if you can secure a lower rate by refinancing. Even though interest rates are rising, they are certainly still on the lower end. This means it may be possible for you to secure a lower rate than the one you currently have.
Think about the future
Before you refinance, you should consider what your future plans look like. For example, if you want to do some home renovations, refinancing might be a good option for you. You can access home equity to provide some cash flow to help pay for these renovations, which are quite pricey depending on the projects you take on. If your plans to renovate fall in line with the possibility of a refinance, it may be a good idea to refinance with this project in mind. However, if you plan to move within the next couple of years, it’s best to hold off on a refinance. Breaking your mortgage terms once to refinance is one thing. If you break them again a short time later to move, this will cost you more than it’s worth. You should refinance only if you want to make the most out of your current home for the long haul.
Contact a broker!
If you think it’s time to refinance your mortgage, the first thing you should do is contact a mortgage broker. Getting started with a refinance is often the most difficult step, because you may not know how to begin. Brokers can guide you through the process, reviewing your current terms and helping you understand what your options look like. We put you in touch with the appropriate lenders to ensure you get the best product for your needs. In some cases, lenders only work with clients who use a broker. It’s important to use our services to give yourself the best advantage.
If you have any questions about your mortgage, give us a call at Centum Home Lenders! You can reach us at 506-854-6847, or get in touch with us here.