25 Sep

When Is The Right Time to Refinance Your Home?

Mortgage Refinancing

Posted by: Krishna Menon

You could be asking yourself if now is the right time to refinance your home. First you need to know whether or not it’s in your best interest to do so, and then figure out what type of refinancing is right for you.

Types of Refinancing

There are two types of refinancing you can consider:

 

  1. If you’re looking to save money then you might want to consider refinancing your rate and term. This means that you’d refinance the remaining principal of your mortgage loan while decreasing your interest rate, as well as the term of your mortgage. This can make your mortgage more affordable.
  2. Now, if you have existing debts and this is the main reason that you’re considering a refinance then you will want to go with a cash-out refinance. In doing so, you’ll get an entirely new mortgage for a larger amount than you currently owe on your existing mortgage. The difference in cash, you enable you to pay off your debts.

 

If you have an adjustable-rate mortgage with a fixed-rate loan, you’re going through a divorce settlement or your want to eliminate your mortgage loan insurance, then refinancing may also be the right choice and decision for you.

Is Refinancing In Your Best Interest?

Most people don’t just refinance with a goal of breaking even, as closing costs add up into the thousands. Therefore, you need to work with your mortgage broker to determine whether it makes sense for you to refinance. They can help you to calculate your closing costs, the point at which you’d break even, and how long it will take for the refinance to itself off. This is what will be the determining factor as to whether or not it’s worth it for you.

 

If you’re not planning to stay in your home long enough to break even and then some, then you should probably consider not refinancing.

Refinancing Your Rate & Term

When you refinance you need to pay particular attention to the term you are refinancing for. Although you can definitely save over the life of the new loan, a longer term can end up costing you more in the long run. So make sure that you don’t only focus on a lower interest rate.

 

If you’ve improved your credit since you got your original mortgage loan then this can also work in your favor to get you a rate and term that you’re happy with.

 

Cash-out Refinancing

While cash-out refinance comes with many advantages, it also has some disadvantages. For instance, if you use this type of refinancing to pay down your debt you’re also reducing the interest rate on that debt. On the downside, you may be actually paying more interest than you think if you’re taking a longer time to pay of the balance you owe. This is because you’ve basically transferred your debt to your mortgage and your mortgage may come with a longer term.

 

The biggest risk involved with cash-out refinances is that you’re turning your unsecured debt into secured debt. It’s one thing to miss a payment or two on your credit card, and see the affects it has on your credit, but it’s a whole other ballgame when you miss a mortgage payment or two. This could result in losing the home you live in and your home going into foreclosure.

 

But the biggest risk in this scenario is in converting an unsecured debt into a secured debt. Miss your credit card payments, and you get nasty calls from debt collectors and a lower credit score.

Miss mortgage payments, and you can lose your home to foreclosure. Home equity debt that’s added to the refinanced mortgage always was secured debt.

 

Consider your options carefully before deciding which type of refinance you’d like to go with. When in doubt ask your mortgage broker, they’ll guide you in the right direction, since they know you best.

13 Sep

Are You The Average First-Time Buyer?

First Time Home Buyer

Posted by: Krishna Menon

You are a first-time buyer and I bet you’re wondering how you compare to other first-time buyers. There are probably a million questions you’re asking yourself including:

  • Do I look like the average first-time buyer?
  • Who are these average first-time buyers and what does their information look like?
  • What is in their savings accounts and what are they looking to spend?

 

Well, the only way to really get answers to these questions is to do your research or read this article. Numbers add up in such a way that we now have the ability to profile the average first-time buyer.

First-Time Buyers in Canada: The Average

 

You could be in your mid to late twenties, and dreaming about your first home. You’re not wrong, it’s the perfect age to start considering making your first big purchase. Even if it’s five years from now when you can actually afford it, you still need to begin planning for it.

 

Surprisingly enough, for the average Canadian first-time homebuyer, they have three characteristics that are quite unique:

 

  1. The average buyer is usually in their late twenties, like you.
  2. The average home in Toronto and the GTA is valued at a little over $400,000.
  3. The average homebuyer has saved approximately $50,000 for their down payment to put towards their home purchase. Since this would fall under the maximum 20 percent down payment requirement, they’d also need to purchase mortgage loan insurance.

 

When you hear about these characteristics you must be thinking, I am the average homebuyer , right? Well the answer to this is yes, providing you live in Ontario.

Other Interesting First-Time Homebuyer Statistics

There are lots of other interesting first-time buyer statistics around the web, believe it or not.

 

Did you know that nearly a third of new homebuyers expect their parents or other family members to help them financially? Are you one of this 30 percent?

 

Even more interesting, nearly ⅔ (60 percent), of first-time buyers have to delay their buying plans, mainly due to the rising costs within the real estate market. These same numbers apply to first-time homebuyers that set fixed, maximum budget for what they actually want to spend on their home. Most of which would spend more just to get a home they really want.

 

You really need to ask yourself just how ready you are? Are you an average buyer now that you’ve read this article? Maybe you need to save more, plan longer or speak to a mortgage agent to learn more about down payment options for your financial circumstances.

 

My Milton Mortgage team can answer all of your questions and help you plan for a brighter and better future, in a home you love. Contact our team today.