What would make someone want to refinance their mortgage in Mississauga, Ontario?
Payment Savings – The interest rate is lower. This will reduce the amount of principal and interest paid over time which could result in a lower mortgage payment or a larger mortgage for a given payment. Tax Deductible Interest – Interest on a mortgage loan that is used to purchase or improve your primary residence may be tax deductible. That might allow you to deduct all mortgage interest from your income when filing your income taxes allowing you to pay less income tax. If you have already refinanced with a non-deductible mortgage loan then refinancing again with an eligible home equity line of credit (HELOC) may allow you to take advantage of the deduction since HELOCs eligible mortgage loans. Lower Monthly Payment – In the long run, it is possible to reduce your
mortgage payment in a number of ways: by increasing the mortgage amount without altering the term, reducing or eliminating monthly payments during a mortgage holiday or interest-only period, and refinancing to a mortgage with a lower interest rate in order to reduce your monthly payments. Increase Cash Flow – Refinancing can allow you increase your cash flow when you have the equity available from unpaid principal balance that has decreased over time. You can use this “equity” for any purpose such as paying off other debts, investing in income producing assets, clearing lines of credit allowing for increased borrowing capacity, etc. HELOCs allow access to this equity at a lower interest rate than typical credit cards or bank overdrafts. Draw money from increased equity – Refinancing to access the equity tied up in your mortgage is attractive as you can typically borrow at a lower interest rate via a HELOC mortgage line of credit compared to other types of loans such as personal lines of credit, traditional home equity loans and mortgages, etc. Consolidating debt – Refinancing high interest consumer debt with mortgage debt has unique benefits. By paying off the higher-interest consumer debt first, you can reduce or eliminate bills faster while saving funds each month on interest which could be invested instead. For example, if you have $50,000 of non-tax-deductible mortgage debt at 4% and $20,000 of non-tax-deductible credit card or unsecured loan debt at 14%, you could save $2,400 per year in interest and pay off the mortgage faster. With a mortgage rate of 4% and an available HELOC rate of 5%, if you draw $20,000 from your mortgage line to eliminate the consumer loans then you will reduce future mortgage payments by $1,500 each month which could result in up to $45,000 saved over time for a total savings of around $75,000.
Refinancing for Investment – Refinancing can allow real estate investors to take advantage of lower mortgage rates to minimize costs when borrowing money. This is similar to Draw money from increased equity but it applies only to those who own rental properties. At the end of the day, mortgage refinancing in Mississauga is an attractive option and it only requires a few questions to understand if refinancing will be beneficial to you:
– If you have mortgage debt with tax deductible interest then mortgage refinancing may allow you to take advantage of this deduction by replacing your mortgage loan with a HELOC mortgage line of credit.
– If your mortgage rate is higher than other loans such as personal lines of credit, traditional home equity loans and mortgages, etc., mortgage refinancing might lower the monthly payments on the new mortgage.
– Mortgage refinancing can reduce or eliminate monthly payments during a mortgage holiday or interest only period. This could result in lower monthly payments for people that cannot afford higher mortgage payments or for those that are saving to pay off the mortgage faster.
– Mortgage refinancing might allow you access to your mortgage loan equity at a lower interest rate than typical credit cards or bank overdrafts.
– Refinancing real estate investment properties with mortgage debt has unique benefits. By paying down higher interest consumer debt, you can minimize costs when borrowing money while reducing mortgage rates which could be invested instead. For more information about mortgage refinancing in Mississauga talk to one of our preferred mortgage brokers today!