27 June 2014
It’s additional financing for your different investments, kids’ education or necessary renovations. There are a few methods of accessing the equity, e.g. breaking the existing mortgage contract, getting a home equity line of credit or blending and extending the mortgage with your today’s bank.
3. To consolidate all your high-interest debts
If there’s enough equity in your home, you’ll be able to pay off your high-interest debts with the help of refinancing. For instance, if you have several unpaid debts, e.g. car loan, credit cards of credit lines, you can consolidate them through the number of refinance options.
Here are some of the basic ones: breaking the existing mortgage contract, getting a home equity line of credit or blending and extending the mortgage with your today’s bank.
In other words, if your home’s cost is $500,000, your mortgage can be about $400,000 ($500,000*80%). Comparing the $400,000 to the existing mortgage balance of $300,000, you can get an extra $100,000. In case you have outstanding credit card debts, credit lines or an auto loan, you may include them into your mortgage at a lower rate.
What does it cost to refinance a mortgage?
Of course, the cost of mortgage refinancing always depends on the method you choose to access a lower rate or a home equity. Anyway, you’ll still have to pay your lawyer.
It’s important to understand that when breaking a mortgage in the middle of your term you’re facing a prepayment penalty. For fixed mortgages the penalty is the larger between three months interest or the interest rate differential payment (IRD). For variable mortgages it’s three months interest. Please, consult your mortgage broker or bank in order to find out the exact penalty size.
The great news is, if you come to us during the month of July for refinance and your new mortgage is greater than $350,000 we will reimburse you legal costs!