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Saturday, February 23, 2019

Is It Time To Refinance?

When people take on a mortgage the majority opt for a 5 year one usually because they intend to stay in the residence and they know their payments for the next 5 years. However life sometimes throws a curveball at us and we have to make hard financial decisions. Perhaps an illness occurred or 1 person was laid off or a divorce occurs and suddenly you can't pay for anything in cash anymore and resort to using credit cards. As we well know credit cards companies love this because the amount of interest you are paying increases.

Perhaps you took a 5 year mortgage out several years ago You now look at how you can lower your payments and because mortgage rates are at a historical low these days it makes sense to look at breaking your mortgage and taking on a new one at a lower rate.  Paying off credit cards at 20% + interest looks attractive when you can get a new mortgage under 4% these days.

Before you do anything you need to know what it will cost to break your old mortgage. In all probability your lender will use the IRD method to calculate your penalty. Not all lenders use the same numbers to calculate. The best thing to do is to contact your lender and ask what the payout cost would be. This will give you a fairly accurate number to work with.

Next step is to talk to someone. Your bank is more than happy to help you but probably will not give the lowest rate out in the marketplace. A mortgage broker works with many different lenders and can look around to find the best lowest rate mortgage to suit your financial situation.  One advantage of using a mortgage agent is that you give your consent for them to pull your credit bureau and they only do it once. If you walk from lender to lender to lender each one will pull your report which could hurt your overall credit score.

Once you select a potential lender an appraisal of your home and property will be done. As lenders can now only loan to a maximum of 80% of the assessed value the appraisal becomes their source to calculate the value of your home.

You will be asked for your up to date mortgage statement , your recent paystubs, your property tax statement, proof of fire insurance and NOAs. Lenders differ in requirements but these are the basics documents required.

If you are successful in obtaining the mortgage you can pay off the outstanding debts and start back on the road to successful financial pl