How much equity do you need to reach your particular financial goals? Anytime you are refinancing, always consider including any high interest credit card debt as well!
This will have a positive effect on both your credit rating and will lower your monthly payments. A few scenarios and things to think about before a mortgage refinances:
-A construction/renovation project: Are you expecting a child or have another reason that there may be a small window of opportunity that your renovation/construction project would have to be completed within? This can be a hurdle if your current mortgage lender will not give you the option of refinancing to the amount of the funds needed to complete a project. So going the alternative mortgage-financing route will be your best bet to get those extra mortgage funds.
– To rebuild credit: If your credit is going down hill please get it fixed before it’s damaged to the point where no mortgage lender will finance you. Since your high interest debt will be eliminated, your monthly payments will decrease. With thosenew extra funds, implement a plan with your independent mortgage broker to pay down the new mortgage ASAP.
-Down payment for investment property: Calculate all down payments and closing costs before requesting a mortgage.
-Furthering education: Funding schooling is only a small portion; consider the other on-going monthly expenses, realistic length of time it takes searching a job once you are 100% qualified in that new profession. THE worst time to try to get extra funds from any financial institution is when you are unemployed.
-A short or long-term investment: How long will you need the funds in the investment before you see a return? Will you be paying down the new mortgage with the dividends? If so, are you accessing enough equity to make it worth your while?
-To Start a Business: It is best to take your time and calculate an accurate budget before accessing any equity. If you are currently employed by a company and looking to start your own business, get your property refinanced before telling your boss that you will be quitting.
The reasons for this are:
1. Your new mortgage provider may require a strong employment letter from your current employer complete with your boss’ or administrators’ contact information.
2. They will contact your employer and get a verbal confirmation that your employment hours are guaranteed and there is no sign of work slowing down in the future.