Refinancing is a very useful tool that can help you keep your debt under control. To have maximum impact, this needs to be a well-planned and well-timed measure that takes specific circumstances into account, ensuring that new agreement will fit the client’s realistic needs and future prospects. Let’s run through some scenarios where applying for a loan renewal can be the most optimal solution:
Hunting for low APR’s
Naturally, everyone would like to pay less for their mortgage and securing a loan with borrower-friendly interest rate is the first priority. Since APR’s tend to go up and down in irregular intervals, it makes sense to keep track of the market and jump on a chance to restructure your existing loan under more favourable conditions. Of course, doing this too often would be counterproductive, as fees and other expenses associated with a mortgage application would offset the difference.
There are situations when a family budget can’t support the current expenditures for loan servicing, and refinancing is the only viable option. In such cases, the right move is to ask for debt restructuring and extend the termination data as far back as the lender will allow. This will reduce the monthly payments and buy you some time to improve your financial situation, albeit at a cost of longer dependence on the bank that continues to chip away at your financial freedom.
Upgrading your home
In all likelihood, your home will be in need of renovations long before your mortgage is paid off. A refinancing loan could provide you with the funds necessary to build improvements or even purchase a new house while redistributing your total debt at the same time. Be careful though – taking additional money when refinancing increases the amount you owe, so it probably shouldn’t be considered until you return at least a half of the first loan or your family revenues increase considerably.
Moving to another city
Here is another reason for mortgage refinancing. Guelph and other Canadian towns have a sizable population of new residents, many of whom decided to switch their old mortgages for new ones with local banks. Almost all lenders are offering refinancing programs, so it should be possible to arrange a smooth transition and move into a new house immediately. If you do everything the right way, you could end up with a larger house while retaining a similar level of financial commitment.