Refinancing Your Home
The Vancouver Island real estate market continues to enjoy a steady upswing. According to the Vancouver Island Real Estate Board (VIREB) the overall average value for a single-family home within the area has increased to $444,500, an 18% increase from 2016. Apartments and townhomes are also following this trend, showing 24% and 28% increases respectively.
If you are a current homeowner, what can this mean for you? Well, you may be considering taking advantage of this upturn by refinancing your mortgage in order to make your home equity work for you.
Have you been wanting to pay off nagging debts at a potentially lower interest rate? How about freeing up some money to enjoy a better quality of life and a lower overall monthly mortgage payment? Maybe it’s time to go on that dream vacation, finally buy that boat or go back to school...you can probably dream of numerous possibilities for your money.
So how does this all work then? For starters, your home can be refinanced up to 80% of its value.
For example, say you own a home that is worth $600,000 and you currently owe $380,000 on your mortgage:
$600,000 x 80% = $480,000 (refinance value)
Your current mortgage balance is then subtracted from this number:
$480,000 - $380,000 = $100,000
Take this amount, and you have up to $100,000 of accessible equity to do with what you please!
Sounds tempting, doesn’t it? While refinancing may be an attractive option for many homeowners, it is important to assess whether it is the right time or the right option for you to refinance. If you have to break your current mortgage term early you may be faced with costly penalties in doing so. As we have witnessed, penalties can vary greatly, from as little as $600 to as high as $15,000! This is why it is important to speak to a mortgage specialist before proceeding in order to evaluate your particular situation.
Refinancing may be the most beneficial for homeowners who are currently in higher interest mortgages or for those who want to clear out debts. “But it’s not free money”, you say, “I still have to pay it back”. Well of course. In doing this you will be ending up with a new (higher) mortgage balance and you are technically stretching out the amortization period of your previous debts. However, in refinancing, you may be freeing up cash while also lowering your overall monthly mortgage payment while your home continues to be an appreciating asset. With a lower monthly payment, you could potentially choose to put the extra money you are saving towards your loan principal and pay off your home even faster!
If you have any questions on how refinancing might look for your specific situation, feel free to reach out to discuss your particular situation. Our helpful salaried mortgage brokers can help provide a pressure-free environment for you to decide what may be the best option for you.