Wednesday, November 5, 2008

Take Control of Your Home
The equity you’ve built up in your home can be a powerful financial planning tool. Through mortgage refinancing, you can access that equity to pay for home improvements, consolidate debt,purchase a vacation property or invest in your future.
The term ‘refinance’ means to pay in full and discharge a pre-existing mortgage with the proceeds of a new mortgage. When a borrower secures a new mortgage that is larger than the pre-existing mortgage, it is called an ‘equity take-out’.
In some instances, rising levels of consumer debt – often financed by high-interest credit cards – and relatively low mortgage rates prompt homeowners to look more closely at how their homes can help them increase liquidity and improve their overall financial situation.
In other cases, homeowners leverage mortgage refinancing for renovations that, in turn, boost the values of their homes.
If you are considering mortgage refinancing, you will need to first thoroughly review your existing financial situation and mortgage commitments with your financial advisors. Potential short-term gains, such as lower monthly payments, should align with your long-term planning goals. As with so many financial planning exercises, one size does not fit all.

Why Refinance?
There are many reasons to use your home equity to secure additional credit at competitive interest rates.
• Debt consolidation – since mortgage rates are generally lower than other forms of borrowing, you can use the equity in your home to pay in full high interest/high payment debts such as credit cards.
• Home renovations - the equity in your home can be used to finance home improvements, which can potentially increase your home’s value.
• Second property - by leveraging your home equity, you could purchase an investment property or vacation property.
• Investments - the equity in your home can be reinvested in other investments, such as mutual funds or stocks. In fact depending on your investments and your circumstances, a portion of the interest you pay on your mortgage may be tax deductible.
• Education - you can refinance your home to fund education costs for your children, or for yourself, as an alternative to liquidating other investments or RRSPs.
• Retirement planning – your home equity can also be used to make RRSP contributions. In many cases, the compounding benefits of long-term investments and tax deferrals could outweigh the penalty costs of a discharging an existing mortgage.
Calculating the Benefits
Depending on your situation, you might consider one of the following approaches when refinancing your home:
• breaking your existing mortgage and applying for a new one,
• increasing your existing mortgage with your existing lender,
• taking a second mortgage,
• applying for a home equity secured line of credit.
Speak with a Mortgage Intelligence independent consultant to assess the potential benefits and compare your current debt payment schedule against one that takes advantage of a refinanced mortgage. E-mail Larry Broadley today. larryb@hay.net

Before making any decisions about your mortgage, it is a good idea to complete a review of your current financial situation. Below are some key items to document as you get started.

Your Home’s MarketValue: $
What do you estimate is the current market value of your home?
Your CurrentMortgage: $
What was the principal balance of your mortgage at start of term?
What will the principal balance of your mortgage balance be at end of your term?
What is the original start date of your mortgage term?
When does your mortgage mature/renew?
What is the amortization period of your mortgage?
Who is your current lender?
What interest rate are you paying now?
What is your payment frequency (monthly, weekly, bi-weekly)?
How much are your regular payments?
PrepaymentPenalties for Your Existing Mortgage: $
You will likely be required to pay a prepayment penalty if your mortgage is discharged mid-term. Lender prepayment policies should be detailed in your mortgage documentation.
Total monthlypayments on existing obligations $
Includes automobile loans, student loans, credit cards, alimony, etc.
Gross annual income $
our family’s total income from all regular sources
.

This is YourMortgage Profile

Once you have defined your mortgage profile, work with Larry Broadley a mortgage professional to review all of your options. larryb@hay.net

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