A year ago, you got the best mortgage rate Markham lenders could provide. Or, so you thought. But times are changing, mortgage rates are falling, and what was the “best” then no longer is the best now. Is it time to think of refinancing?

As with anything that has to deal with finance, the answer is not a simple yes or no. You will have to consider many things, the first of which is where you live and what the terms are in your area. If you live in Canada, for example, refinancing Toronto mortgages may make sense, give the mortgage landscape at present, but it could also cost you more money than you can afford to lose. Ultimately, you will find that a refinance could cost you more money in the long run – it all depends on your financial situation. So, look before you leap. Here are three things to think about before you decide to refinance.

1. Costs

Consider how long you intend to live in the house. This affects how long it will take you to reach the break-even point if you refinance. Let’s suppose, for instance, that if you find an interest rate that is lower than 1 percent, you can decrease your monthly payments by at least $100. This amount is nothing to sneeze at but if your closing costs on your refinance totals $3,000, this means you will have to stay put in your house for the next 30 months just so you could break even on the refinancing. If you plan to move within three years or sooner, refinancing will cost, NOT save, you money.

2. Equity Amount

Most banks ask for 20 percent equity just so they would refinance your existing mortgage. Does this mean you cannot refinance if you don’t have that much equity? Yes, you can – but you won’t likely get a good deal if you don’t have an equity of at least 20 percent.

Moreover, if you have been staying in the house for some time and you’ve built up some equity, it’s possible for you to save more money because you can refinance an amount that is much lower than the original loan. What this means is that you will be making lesser payments monthly, since you are paying back a new, smaller loan.

3. New Terms

Most people forget that refinancing extends loan terms. You shouldn’t because new terms will change the payments you have to make. Suppose you have paid off 15 years of your 30-year mortgage. This means you only have 15 years more to go. If you refinance, however, you’re back to square one!

Clearly, there are many things about refinancing that you should think about before you rush to a lender. Yes, low mortgage rates are great. And yes, they just may be able to save you money but that’s theoretically. In the real world, you cannot always take advantage of low rates. So, consider all possible angles before you refinance. When you do, you can reap all of the benefits and none of the drawbacks.

Allegro Mortgages Corp. – Best Broker for All Your Financing Requirements (416) 987-0008

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