How to Refinance a Mortgage
Many homeowners consider the option of refinancing their mortgage for several different reasons. The main goal is to gain access to a lower interest rate which can result in big savings over the course of your mortgage. If you’ve done your research and feel that refinancing your mortgage makes sense, here is a great way in which you can go about it.
The most popular approach is a home equity line of credit. This option allows the homeowner to access a large percentage of their home’s value. Once that money is available, you can use the amount that you need so that you only pay the interest on the amount you actually withdrew. The reason this option is so popular is that the interest rate that accompanies this financial tool is lower than that of a credit card, for example, because your home is used as collateral. Also, it operates in exactly the same way as your primary mortgage where a specific amount and fixed monthly payments are applied. This is why a home equity line of credit is often referred to as a second mortgage.
Since refinancing your mortgage is a big decision, there are many elements to consider. A few things you should keep in mind when it comes to a home equity line of credit are the interest charges which are applied and calculated at a variable rate plus the prime rate. The variable rate will vary from one lending institution to another and different banks will have different rates to offer. You must also remember that the outstanding balance of your mortgage loan and the home equity line of credit cannot together equal more than 80% of the home’s current value.
Lastly, while a home equity line of credit and a home equity loan may sound similar, there are two different options. If you are unsure of the differences or want to discuss refinancing options with the best mortgage broker in Edmonton, contact Collin Bruce. If the time is right for you to refinance your mortgage or you have questions regarding a second mortgage and need guidance, call Collin Bruce today!