With interest rates sitting at the lowest we’ve ever seen – low rates never before seen by your parents and even your grandparents – now is an ideal time to tap into the available equity in your home or cottage to fund your renovation or landscape needs. But these rock-bottom rates won’t be available forever; the Bank of Canada estimates fixed mortgage rates will likely begin to rise by summer of 2016.
As a home owner, I understand the importance of maintaining my home and property to ensure it ages well with the times. But I also know that it can be daunting when you think about all the ongoing costs for renovations and maintenance required to keep your home to your liking – especially if you also own other property.
The good news is, if you have built up equity in your primary residence or even other properties, refinancing your mortgage is a cost-effective way to have funds available for upgrades to your getaway.
One refinance strategy that mortgage consumers often use involves extending their amortization period to a maximum of 35 years so they can lock into an excellent fixed rate for their mortgage and renovation expenses. In addition to setting you up with a new lower mortgage payment, GLM Mortgage Group can also find a lender that offers the most flexible prepayment privileges.
If you choose to refinance, it’s important to note that there may be penalties for paying our your existing mortgage loan prior to renewal, but these penalties will be offset by a lower interest rate and, at the same time, you can access extra money to put toward your home renovations.
By refinancing, thanks to lower interest rates, even though you are taking on more debt, you can pay of your mortgage faster. Most mortgage products, for instance, include prepayment privileges that enable you to pay up to 20% of the principal (the true value of your mortgage minus the interest payments) in lump sum payments per calendar year. This will help reduce your amortization period (the length of your mortgage), which, in turn, save you money.
Another option to enable you to access funds for home renovations is to take out a home equity line of credit (HELOC) on your primary residence. HELOC interest rates are lower than credit cards and a little higher than the interest rate you will have on your mortgage. This line of credit is a good option for those that know they want to do renovations but want the flexibility of being in control of their own timeline. In other words, there are no time restrictions within which to get the work done. This way you only pay interest on the money that you borrow and you can pay it off anytime without penalty. Or, when you sell your home, this secured line of credit will automatically be paid off with the proceeds of the sale.
At GLM Mortgage Group we can help you with obtaining a Home Equity Line of Credit or refinancing your home so that you have the money available to you to do home improvements. Please go to www.glmmortgage.com and fill out our secure online application to see what home improvement financing options are available to you. We’ll get back to you within 4 business hours to discuss your financing needs and options.