Finding your first mortgage is great, but it’s not always the best deal. Refinancing your mortgage is a great way to renegotiate terms and ensure that you’re getting the best mortgage that’s possible. This isn’t always possible, but when it is people often leap so quickly at the chance to take advantage of it that they take another bad mortgage for themselves, rather than fixing the issue.
Myth #1 It’s too soon to refinance
While it has become common practice to rule that you cannot alter your mortgage during the first year, it is not always the case. There are ways of working with the rule even if it is in place, and it’s not always in place, there’s often something else to be done to work with it. For example, even if you can’t alter with your current bank this year, have you considered the possibility of switching banks entirely?
Myth #2 The interest rate is all that matters
The interest rate is often considered the bottom line in terms of mortgage refinancing, but this is a mistake. Nobody’s going to deny how important the interest rate is. A difference of 1% in mortgage rates can equate itself to thousands of dollars in cost. But it’s not the only factor.
Myth #3 It’s too expensive, I can’t afford it
Mortgage refinancing comes with costs. This is no secret, but it shouldn’t be a total deterrent either. When you’re trying to assess what a mortgage refinance is worth, compare it to the savings that it offers (the interest rates, the flexibility, the new terms). It may or may not add up, but at least then you’ll be in the place to make an informed decision.
Other factors that can contribute to the efficiency of the mortgage refinancing include:
- Ability to automate payments from pay cheque to mortgage
- Flexibility to make extra payments
- Fixed rate versus variable rate
These factors add up to more than significant savings themselves, and should all be kept in mind – rather than JUST the interest rate. Nobody’s saying forget it altogether, but do remember what else is key.
Myth #4 You’ll never see those savings
A lot of people try to scare people into thinking that the savings for mortgage refinancing are so delayed that they’re essentially useless. This can be short sighted. Take a look at what the refinancing will do for you, because if it allows you to make extra payments – and you’re able – you can see the savings even more immediately. And even if it isn’t immediate, if the savings outweigh the costs, the savings are entirely worth it.
Myth #5 Banks are the only way to go
If you’re concerned about refinancing because the bank just isn’t going to offer you the right terms, consider a non-bank agency. There are a lot of reputable alternatives, and so long as you stick with those in great reputation then you’ll be in fine form to refinance.