What are the main types of refinancing?
- Cash-out refinancing
- Rate and term refinance
- Reverse mortgage
When should someone sit down and refinance?
I believe a customer should sit down to consider refinancing their home if they are examining options for the future. Examples include:
- An emergency with the property. For example, the roof needs to be repaired
- If the rates are increasing and the term is up. Additionally, they want to lock in a rate early before the rate increases.
- If a borrower is in need of cash flow
- a family member is in need of a gift to purchase a property.
Where does a client need to go to get a refinance done?
A client can refinance with their original lender. In addition, I recommend clients should compare their options from the original lender with Mortgage Suite.
How does it affect someone’s mortgage when they refinance?
Refinancing is breaking your term early. Unfortunately, there may be high penalties if you’re in a fixed rate and there is still a significant amount of time left before breaking your term. If you are refinancing at a higher rate the penalty may not be so high, usually 3 months of interest. Refinancing can affect your mortgage by adding time to have it paid down, referred to as extending amortization. Furthermore, a refinance can increase your payments or in some cases decreases your payments.
Why should a client refinance their mortgage?
Borrowers should sit down to do a refinance if they are looking to consolidate some debts. A client can refinance to complete some renovations on the property and increase the value of the home. A client can do a refinance to take equity out of the home to gift to a family member looking to buy their own home and might not have enough down payment. A client can do refinance as a reverse mortgage if they are retired and need money for whatever reasons. A client can be refinancing to lock in a better rate and start a new term to lower payments.
