Narendra Singh, Branch Manager at Envision Financial’s Fleetwood Branch.

Narendra Singh, Branch Manager at Envision Financial’s Fleetwood Branch.

The dollars and cents of mortgage refinancing

Talk to an advisor to find out how you can take advantage of low interest rates

You’ve probably heard that interest rates are low.

Advisors said it was a great time to borrow two years ago, when mortgage rates were between three and four percent. Now mortgage rates are even lower (under two percent), so the climate’s even better.

“A mortgage is usually the biggest debt that our members take on in their entire lives,” says Narendra Singh, Branch Manager at Envision Financial’s Fleetwood Branch. “We always advise finding the best interest rate for your biggest debt.”

It’s time to schedule a chat with your financial advisor.

Reasons to refinance

Refinancing a mortgage can help you achieve many financial goals, but it’s important to clarify your specific wants and needs. Do you simply want to take advantage of lower interest rates, or are you hoping to get some extra cash to pay for a renovation? Do you want to lower your monthly payment, or pay out your mortgage faster?

“You may be in a situation where you’ve paid down your mortgage, but with low interest rates you can free up some equity and use that cash to invest,” Singh says. “We can advise you on the best options based on your financial goals and your specific financial situation.”

What about penalties?

Most mortgages have pre-payment penalties, so is refinancing still a good idea?

“It depends what kind of mortgage you have, and your advisor can look into that. If your penalty is low, it can make sense to pay the penalty and save money with the lower interest rate,” Singh says. “If your penalty is high we can ‘blend and extend.’ We’ll be able to lower your interest rate without paying a penalty — your interest rate won’t be as low as a brand new mortgage, but you can still save money.”

Make a plan that works with your spending style

How comfortable are you with risk? Do you stick to a consistent budget? Your money style affects the kinds of investments and loans your advisor will suggest.

“You may want to refinance your mortgage from a fixed to a variable rate, but only if it matches your risk profile. Fixed rates give you peace of mind, and you’ll have predictable monthly payments. If you’re comfortable with risk, historically, variable rates have saved money in the long run,” Singh says.

Refinancing isn’t for everyone. It does mean you’ll be taking on more debt, so if you don’t control your spending and cash flow it can be risky to refinance. There are expenses associated with refinancing too — legal costs, appraisal fees, mortgage penalties, etc. — but with interest rates this low you’re likely to save money in the end.

To find out if mortgage refinancing is right for you, book an appointment with your Envision Financial advisor today.

Envision Financial is a division of First West Credit Union.

Financial planningMortgage Brokers