Understanding Mortgage Refinance Options
“Mortgage Refinance Options Can Vary Widely From One Scenario To Another”
Your mortgage refinance options are going to depend on the specific circumstances that have lead up to the need for this financing action to be considered or be required.
The first consideration when looking at a mortgage refinance scenario is what is the purpose or need for mortgage refinancing in the first place?
Here are the three most common reasons or needs for a mortgage refinance action.
- The borrower require additional financing against a property and wants to pay out the existing mortgage or mortgages registered against the property with a larger new mortgage.
- The borrower wishes to acquire a better interest rate and/or better mortgage terms from a new mortgage lender which can create the need to acquire a new mortgage (versus transfer the existing one) to payout the existing mortgage held by the current mortgage provider.
- The current lender is not prepared to extend a mortgage renewal causing the borrower to need to seek out a new mortgage provider while using the mortgage refinance process to accomplish this move to another lender.
Regardless of the reason, a mortgage refinance creates the need to create a new mortgage or rewrite or amend the existing mortgage either to change the terms of the mortgage or to transfer it to a different mortgage lender.
The second second consideration when looking into mortgage refinancing options is the structure and requirements of any existing mortgages that would be paid out through the mortgage refinancing process.
Regardless of how a mortgage refinance is funded, any existing mortgage payouts may be subject to prepayment penalties which may not make payout the most cost effective approach.
This is where consideration is given in certain situations to a second mortgage or home equity line of credit as other options to provide additional capital for the least amount of cost.
The third consideration is given to the financial and credit profiles of the borrower or borrowers.
Forced refinance mortgage actions where either the borrower must find another mortgage lender or a certain level of funds are required, can reduce the number of potential options that are available to an existing borrower.
And mortgage refinance actions that take place when cash flow and credit are weak or sub optimal may limit the available choices for mortgage refinancing to short term lending options like private mortgages where financing can be put into place to stabilize a situation and allow time for lending criteria to be strengthened.
Because every situation is somewhat unique, and also because lender programs can change on a regular basis, it can be hard at times to determine what the most cost effective options are for a mortgage refinance requirement.
The best approach for getting a good mortgage refinance result is to work directly with an experienced mortgage broker who can thoroughly go through your situation and requirements and provide you with relevant options for your consideration.
About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel