Refinancing your home to your advantage

There are numerous reasons why homeowners choose to refinance their mortgages – everything from debt consolidation to freeing up money for their child’s education to using their home equity to buy another property.

But the most popular reason for refinancing at this time of year is for holiday gift buying and entertainment.

Planning ahead really can save you money down the road. And with the high-cost holiday gift-buying and entertaining season quickly approaching, this may be the perfect time to refinance your mortgage and free up some money instead of relying on high-interest unsecured credit such as credit cards and lines of credit.

You may find that taking equity out of your home will help bring joy back into your holiday season – and start the New Year off on a debt-free note, as you may also be able to use some of the equity in your home to pay off high-interest debt such as your credit card and/or line of credit balances.

This will enable you to put more money in your bank account each month. And since interest rates continue to hover near historic lows, switching to a lower rate may save you a lot of money – possibly thousands of dollars per year.

There are penalties for paying your mortgage loan out prior to renewal, but these could be offset by the lower rates and extra money you could acquire through a refinance.

With access to more money, you’ll be better able to manage both your holiday spending and existing debt.

Paying your mortgage down faster – by refinancing, you may extend the time it will take to pay off your mortgage, but there are many ways to pay down your mortgage sooner to save you thousands of dollars in interest payments.

Most mortgage products, for instance, include prepayment privileges that enable you to pay up to 20% of the principal (the true value of your mortgage minus the interest payments) per calendar year. This will also help reduce your amortization period (the length of your mortgage), which, in turn, saves you money.

You can also increase the frequency of your mortgage payments by opting for accelerated bi-weekly payments. Not to be confused with semi-monthly mortgage payments (24 payments per year), accelerated bi-weekly mortgage payments (26 payments per year) will not only pay your mortgage off quicker, but it’s guaranteed to save you a significant amount of money over the term of your mortgage.

By refinancing now – before the holiday season is in full swing – and planning ahead, you can put yourself and your family in a better financial position.

Jean-Guy Turcotte is a Mortgage Broker and Partner with Dominion Lending Centres-Regional Mortgage Group in Red Deer.

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