Refinance + Pay Off Debt


We all know that refinancing refers to financing something again. Usually, this involves a new loan with better, aka lower, interest rates. Refinance + pay off debt is something many people choose to do to move towards more financial freedom. Does that sound like something you benefit from doing? Are you looking for more financial freedom?

When you refinance, you are basically getting rid of your old loan and getting a new one. A lender pays off one mortgage with another. People often refinance to pay off debt, even though you can use a cash-out refinance agreement in other ways, such as car repairs or home improvements. Paying off high-interest credit cards often tops the list when it comes to the reason behind applying for cash-out refinancing.

Reports show that 54% of Canadians don’t pay off their credit cards every month, and 50% of them are in debt for more than a year. The average annual percentage rate is more than 16%! Refinancing options are often much lower!

Here at LeSolace, we put together lend + solace. Google defines solace as “comfort or consolation in a time of distress or sadness.” This is our goal to bring peace to you during this often challenging time of change. Everyone has a different situation to get an idea of the process online, but talking with a professional is essential.

Refinance + Pay Off Debt

Homeowners sometimes decide to refinance their mortgage to pay off debt. It makes sense to pay off high-interest debt, like from credit cards. In these cases, a cash-out refinance could be a good solution and save money in the long run. Refinancing is getting a mortgage for more than needed for the home to have some ‘extra’ cash to use.

Refinancing a home and getting a better rate is often worth a higher monthly payment. You may be able to use more money towards your debt without actually changing the principal balance. Doing this can lead to better financial management and the ability to start paying down your debt. It is time to figure out how to move into financial abundance.

If you have a low credit score or a poor credit history, securing a refinancing option will be more challenging. Missing or late payments and credit cards with collection accounts are more things that make it harder to refinance.

Fees & Closing Costs

Nothing in life is free, including refinancing. Here are some average costs of the process. But every case has its own set of circumstances.

  • Application fee: $75 – $500 (to be paid whether or not the loan is approved)
  • Appraisal of property fee: $300 – $500
  • Loan origination fee 0.5% to 1.5% of the amount of the loan (sometimes it is 2% – 3%
  • inspection fee $175-$350

Requirements for Refinancing


    One must prove that they can repay the mortgage, so verifying that you are employed and have a steady income is necessary. Most times, these statements are requested to process your request.

     

    • Pay stubs
    • Tax returns, T4’s, Letter of employment (T1 if self-employed)
    • Homeowners insurance
    • Debt statements
    • Asset Statements

     

    The Pros of Refinancing

    Why refinance? Check out the top three benefits!

    1. Lower interest rates: Reducing your interest by 1% could consider a win. If you can reduce it by 2 %, that makes refinancing a great deal.
    2. Consolidate debt: Having all your debt in one place makes payments more manageable. Consolidation allows you to move into a more efficient model while removing the monthly payments and various terms and conditions.
    3. Get rid of mortgage insurance: To get rid of private mortgage insurance, homeowners move into a conventional through refinancing an FHA loan. This action is feasible once a person has earned 20% equity in their home.

    What to Consider


     

    1. There is a price to pay with refinancing. The cost of all the fees adds up. Overpaying in the long term can happen, even with ‘no-cost mortgages.’ Talk with us today to find out what deal we can offer you.
    2. Closing costs on the loan principle can be high.
    3. There is a chance that your credit could drop if you refinance personal loans. Yet if you make on-time payments, and with some time, they could increase. If you use the refinancing to pay off another existing loan, then there aren’t many changes.

     

    Contact LeSolace Today

    Helping you is our favourite thing to do. Contact us today. We aim to take away the stress from your life when dealing with mortgages. Our licensed agents and mortgage broker are ready to guide you in our in-house mortgage underwriting and credit structuring to reduce the risk of our lenders.

    Let us share our competitive rates with you today!

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