As life is unpredictable, you may receive windfall profit or lose money or need money for emergencies. If you need urgent funds against your home equity, you can either refinance or get a 2nd mortgage. Refinance, and 2nd mortgages are based on the equity of your house. If you have access to equity, it helps you to get the funds for your needs. In this blog, we would shed light on Refinancing and answers some frequently asked questions.
What is Refinancing?
Refinance means breaking your existing mortgage in the middle of the mortgage term and getting a new mortgage. It is a blended payment of Principal and interest rates, and it exists for the long term. You can consolidate your high-interest debts, renovate the house, or can get funds for emergencies. Besides, you can also enjoy lower interest rates and save money.
However, you might have to pay hefty penalty charges. If you refinance through the same lender who has your current mortgage, you might save on penalty charges. Refinance also includes a legal fee, registration fee, and mortgage prepayment penalty. If borrowers want to avoid those extra costs, they have another option that is a Second Mortgage.
How much equity do I need to refinance?
For example, your home is valued at $500,000, and your first mortgage is $250, 000. How much amount you can take out? You can get 80% of home value minus your first mortgage ($500,000*80% – $250,000= $150,000). Based on this example, you can take out $150,000 from your equity.
Do I lose equity when I refinance?
If you refinance your property to 80% Loan to Value, you still have 20% equity in the house. The funds from the equity you take out are your responsibility, and used funds are used equity. Equity is the sum of down payment and appreciation in value. Banks use the current appraised value of property to determine the loan amount.
Can I Refinance my house without 20% equity?
A general rule of thumb is that you should leave at least 20% equity in your house, whereas if you need to take out more than 80% Loan To Value, you can opt for a Second mortgage. Refinancing is only possible when you have at least 20% equity. Call MB Mortgages for further information.
Does Refinancing hurt my credit score?
Lenders can review your credit score when you apply to refinance a loan. This is referred to as a hard inquiry on your credit report, and it can lead to a temporary decrease in your credit score. However, the savings from refinancing, especially on a mortgage, generally outweigh the negative consequences of a minor credit score drop. And when you pay off your new loan, you will be able to save more in your pocket, and it also helps to improve your credit history over time.
Does my credit score have to be good to refinance?
Generally, you should have 620 or more beacon score to refinance your mortgage. The key here is that good credit score can help you get access to numerous lenders who can offer you lower interest rates. We at MB Mortgages can help you guide how you can improve your credit history to benefit from lower interest rates.
If I have a challenging credit score, can I still refinance mortgage?
If you have bad credit history, you might lose the opportunity to refinance your mortgage from Traditional Lenders. However, you can knock the door of Alternative or Private lenders as they accept if borrowers have low credit scores and unstable income sources. Private lenders will lend you money based on your house’s equity, but their interest rates are higher. MB Mortgages is also here to help you with the Refinancing of your current mortgage. We can evaluate your financial situation and give you smart financing options.
Which option is better Second Mortgage or Refinance?
When you refinance your mortgage, you must go through the hefty penalty charges. It includes a legal fee, registration fee, and mortgage prepayment penalty. Refinance is for the long term as it blends into your First Mortgage. On the contrary, if you want to avoid penalty charges and do not want to leave the current lender’s rate, you have another option called a Second Mortgage. The second mortgage has higher interest rates; it is an interest-only payment and usually exists for a short-time period.
Before taking out a Second Mortgage, you must ask yourself a couple of questions: do I have a good credit score? Or If I have a bad credit history or unstable income, what options am I left with? The answers to these questions will help you to decide which option is suitable for your situation.
At MB Mortgages, we can offer you Second Mortgages up to 90% Loan-To-Value. Second mortgages can consolidate high-interest debts, home renovations, emergency money, leisure, or pay for new expenditures. Your First mortgage will still be existing and will not be replaced by the second mortgage. We have in-house funds available for rush closings without income and credit checks.
Why choose us-
As a leading Mortgage Brokerage, we have strong relations with multiple banks and numerous lenders. We work with Canada’s leading lenders to provide you a mortgage solution that fits your budget. Our mortgage and financing process is amazingly simple, we represent you and match you with the best suited mortgage as per your needs. This way we can guide you through this complicated process with our years of mortgage financing experience.
• We are dedicated and professional Accredited Mortgage Brokers in GTA.
• We are well trained and have experience in the mortgage financing field more than 10 years.
• We can shop around with different lenders to get you the best possible mortgage rates and conditions as well.
• We have different options for different income and credit level with access to number of private lenders to suit borrower’s needs.
We are a professional mortgage broker in GTA. We can help you secure a mortgage with best mortgage interest rates. We are located at 2896 Slough Street, Unit # 6, and Mississauga, ON L4T 1G3. Call MB Mortgages Inc. today at 905-458-6929/416-939-7131 for your queries or you can email us at: firstname.lastname@example.org or you can visit our website at www.mbmortgages.ca
The information provided in this blog post is intended to provide general information. You should consult with a mortgage professional to fully determine the scope of your situation. MB Mortgages shall not be held liable from usage of the information provided on this page. Individual situation may vary.