With Covid still lingering and the fact that some of us have lost some income, resources or even lost your job and/or your business has been affected financially, Sherry has some great tips about re-financing and how you can avoid some common traps.
I want to stress how important it is that if you re-finance a property that you know what you are doing and what the pros and cons are. Every time you re-finance you set the clock back as well. There are many articles out there so check some reliable and reputable sources so that you understand what re-financing your home means.
If you are struggling with your financials, I highly recommend you reach out to Sherry and get some information and maybe some help. Sometimes just having someone else make you accountable to look at and review your money is all you need. But if you need more she is available to outline her services and pricing given each individual person’s or family’s financial situation. She is great at what she does.
I also can easily provide some contacts for your local lending institutions if you are not sure where to turn. You can also change lenders but you must know the costs of moving your mortgage if you are not satisfied with your current lender. Having some knowledge before you meet with your financial institution will go far in understanding your situation and what is best for your lending needs and concerns. It can feel overwhelming and knowledge is power so do yourself a favour and do some research first.
Here are Sherry’s tips:
Our money is very emotional. Add in some debt and it gets even more emotional. Top the emotions off with high interest debt, low mortgage rates, and the rising value of homes, and you could have the perfect recipe to save yourself a good chunk of money with a home refinance that includes your debt OR it could be a recipe for disaster!!
Listen, I’m not trying to scare the crap out of you, but I want you to make this decision with all of the factors that come into play today and in the future! I want your home to be your sanctuary and not a financial burden, so I am sharing with you four things you NEED to consider when exploring a refinance.
#1 – The cost to refinance. What fees will you be incurring to refinance. Make sure you fully understand what it is costing you. If your mortgage expert is not clearly explaining this to you, it may be time to look for a new expert! You need to have someone in your corner that you trust and that is giving you all of the details. Listen to your gut, if it doesn’t feel right, find someone new to help you. You don’t have to stay with your current lender, there are lots of options out there. It is also possible that you will find a lender that may cover some or all of these costs for you!
#2 – The interest numbers. Mortgage rates are very attractive right now. From a numbers perspective, you may have the potential to reduce your interest costs, maybe even a significant amount, if you have high interest debt AND equity in your home. This obviously depends on your specific situation and is another way that your mortgage expert should be guiding you. Don’t just look at the interest %, a lower percentage over a longer period of time (if you extend the payoff date of your mortgage) may not be a savings at all.
#3 – The new payment schedule. If you can save yourself on interest, that’s great, but you also need to be able to make the payments. If you are feeling strapped each month now, it’s time to take a hard look at your numbers and make sure that you can make the new payments work. If you are rolling in some other debt, don’t assume that everything works, you have to actually crunch the numbers!
#4 Your future spending habits. Okay, here is the MOST IMPORTANT FACTOR to consider. If your credit card and LOC debts have been slowly creeping up over the months and years, you are NOT READY to refinance. You are spending more than you make! First, you need to change your habits and get your spending under control. A refinance to ‘take care’ of your high interest debt is not the answer. If you think it is, you will be right back where you are now in 6 months or a year. If you keep refinancing every few years, adding in your other debts and extending the length of your mortgage, your payments will keep getting higher as the value of your home increases. You will eventually get to the point where you can’t make your payments and then guess what? You lose your house, you either have to sell it or it gets foreclosed on because you can’t make the payments and then you’re screwed! I don’t want that for you. I want you to take control of your money and really get your shit together to start growing your wealth! I know that is what you want too!
If you see yourself in #4, it is time to get to work. You need a budget; you need a plan for your money every month so you can make some serious changes. You need to focus on making changes to your spending habits. As you make changes to your spending habits, this should translate into your debt trending downwards and your savings growing. Do this for at least 6 months before you even consider a refinance!
There is so much information out there from various financial experts and random internet strangers, that it can feel very overwhelming and can translate into you doing nothing. If you are not sure where to start to make the changes you know you need to with your money, I have a tool that can help you. How about a free budget template that will do all the number crunching for you? Happy budgeting my friend!
SherrySee the full post on Sherry’s website: https://www.moneymindsetfc.com/blog/refinancing-your-home-could-be-a-slippery-slope-4-things-to-consider-first