While not always the case, most people earn more as they gain more experience in their field. From there, the more one earns the more they can afford or the better they will appear to a financial lender.
For loan borrowers, especially first-timers, a challenge comes from agreeing to the terms of a lender when you are not at your peak financial state. This means potentially receiving a lesser amount, paying higher interest rate or not being eligible for better terms like having to pay your loan off in more years.
Finances shift. Refinancing allows you to shift in conjunction.
Align your Finances with your Loan with a Strategic Refinancing Plan
If you’re earning more money or have paid off other debts, it might be good to consider refinancing your mortgage. This way you can pay off your mortgage faster or receive a lower interest rate because your finances have improved.
On the flip side, if your finances have worsened and you need a lower monthly payment, then refinancing might be a necessity.
Interest Rates Should Dictate when you Refinance
If there are whispers of a hike from the Bank of Canada, then consider refinancing to secure a lower fixed rate for a longer period. If rates drop and you’re not locked into a fixed term than it would be wise to consider refinancing.
Monitoring interest rates and the Bank of Canada is important so that you know if you need to act.
Has your Credit Score Vastly Improved?
Along with interest rates, your credit score is a number you want to monitor on a consistent basis. If you applied with a weak or poor rating, then once you move the needle to strong or excellent, refinancing could result in better terms for you.
Refinancing is a powerful tool in a borrower’s arsenal but it should be employed only at opportune times. It can be a reward for improving your financial situation or it can be in response to the market. Either way, make sure that it is something you consider.