Savings from mortgage refinancing
The amount, interest rates on the mortgage financing deal are best determined using a mortgage refinance calculator. It will show how mortgage refinancing saves a lot of money if the occupant is staying in the same home for a longer period. As noticed, mortgage refinancing is the right way to enter a lower interest rate regime warding off pressures of adjustable-rate mortgages or private mortgage insurance costs.
Mortgage refinancing addresses pain points in an existing mortgage while transiting to a better interest regime. There exists an adjustable-rate mortgage, (ARM) plan where the interest rate keeps changing periodically causing a jump in monthly payments throughout the loan’s tenure.
The popular adjustable-rate mortgage is the 5/1 ARM where the starting rate stays for five years. After that, the rate changes with each year. By opting for mortgage refinancing, it is easy to migrate to a fixed mortgage from an adjustable-rate mortgage.
For example, if there is a 5/1 ARM, go for mortgage refinancing by the end of the fifth year to a steady rate with a 30-year fixed-rate mortgage that can yield handsome savings every month.
Private mortgage insurance or PMI is another issue–if the home buyer brought the house via mortgage with less than 20 per cent “down payment” PMI is mandatory to protect the lender against any loan default.
But the annual PMI premiums can pinch with costs varying from 0.5 to 1.5 per cent of the mortgage value. For such borrowers mortgage refinancing is a big relief.
Mortgage refinancing costs
Mortgage refinancing is lucrative but upfront costs are involved. However, the savings justify the mortgage refinancing option. Major mortgage refinancing costs are mortgage refinance fees and a penalty on the premature breaking of the mortgage.
The mortgage refinance penalty depends on the size and term of the mortgage. There will be variations in the rates of penalty for mortgage refinance. In a fixed-rate and variable mortgage, the prepayment penalty will differ. In some cases, if the mortgage refinances is being done with a current lender the breakage penalty gets waived.
On the question of how to do refinancing a mortgage, there are procedures associated with mortgage refinancing with each step requiring some fees. The following are some of the costs of mortgage refinancing in Canada.
- Mortgage discharge fee
- Appraisal and inspection fees
- Mortgage registration fee
- Legal fees
Mortgage refinancing for applicants with bad credit
For a lender to process a mortgage refinancing petition, it will focus on home equity factor. For all borrowers, mortgage refinancing makes sense only if it gives better savings on the existing mortgage interest rate. This raises the question, whether customers with bad credit or poor credit ratings can avail of mortgage refinancing options. The answer is yes if there is the support of an experienced mortgage broker.
There is scope and benefit of mortgage refinancing for bad credit holders as well. The exercise will save them precious bucks over the years and give relief from biting mortgage rates.
Mortgage refinancing applicants struggling with credit rating issues can consult expert mortgage brokers like Saif Abdulah in Ontario and get help in finding the right lender.