August 16, 2018

Should You Take Equity From Your Home?

We all come to a point in our lives when we may need to refinance our mortgage to invest in a major purchase, home renovation, investment, emergency or consolidate outstanding debts.  The interest rates on mortgages are much less than borrowing via another vehicle.  There are some things you do need to consider before doing that refinance.

1. Your Mortgage Terms Will Change

When you refinance your mortgage, what your institution will do is an ‘increase and blend’ on the interest rate, which means they will blend your existing mortgage rate based on the current mortgage owing and blend the current mortgage rate with the amount you want to borrow.  This will increase your mortgage payment based on the amount being borrowed.  The amortization will remain the same as your current mortgage.  If that payment is too high, you can always rewrite a new mortgage and amortize up to 30 years to keep the payment down.

2. Under The New Rules, You Will Have To Re-qualify

The only situation that you do not have to re-qualify for a mortgage is upon renewal, any other situation means you will have to meet the new debt servicing requirements and produce all the financial verification to be approved.  Do the leg work beforehand to make sure you qualify.  If I can help you in any way, call me.

3. What Is The Purpose Of Refinancing?

If you plan to invest these new monies to increase your wealth or do some major renovations which will increase the value of your home or pay off high-interest debt that will lower your monthly expenses, then it makes a lot of sense.  However if you plan to take the equity to go on a extravagant vacation or purchase some long desired things, it may not be a strong financial plan.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406

 

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