Lower interest rates are a primary motivation for refinancing a mortgage, which can reduce monthly payments and total interest costs over the life of the loan. However, there are other valid reasons for refinancing beyond lower rates. Refinancing may allow homeowners to pay off their loan sooner by shortening the term, or take advantage of lower variable interest rates. Refinancing can also provide access to equity in the home through a cash-out refinance. The best options depend on an individual homeowner's priorities and financial situation.

1. Why refinance: how to know
when

2. Refinancing is most often motivated by lower
interest rates, which can bring the dual benefit
of lower mortgage payments and lower interest
costs over time. But there are many other
legitimate motivations. Your personal priorities
will drive decisions on how to refinance. There is
no "one-size-fits-all" solution, but here are a few
reasons why you might want to refi.

3. Lower payments: When rates fall, it's always
tempting to refi. A common rule of thumb is
that a two-point drop in rates will make it
worthwhile. But this is not universal. For a
homeowner with a $300,000 balance, a rate
reduction of even one percent can lower the
monthly payments by a couple hundred bucks
and cut long-term interest expenses by
hundreds of thousands.

4. A quicker payoff: This is often a worthy goal, if
you can afford somewhat higher payments.
Replace a 30-year-term with 25 years, and
obviously you'll be out of debt sooner - and
won't have to double your payments to do it.
They'll rise by about 40 percent (assuming here
that both loans are at about 6 percent interest).
Conversely, choose the ease of a 30-year term
and the payments will go down a lot less than
you'd expect.

5. Lower interest costs: Locking in a better fixed
rate is great, but it is not the only way to lower
interest payments- you can chose a variable rate
mortgage which follows the interest rate of the
bank of Canada, generally offer lower rates.

6. Cash out: Liquidating the equity in a home became
a national pastime in the last housing boom.
Creative loan products and rapidly rising home
values often made it easy to refi (at a lower rate if
you were lucky) and walk away with a satchel full of
cash. Taking cash out of your mortgage can be an
entirely legitimate way to consolidate other debts.
The downside was that gains in equity were in some
cases an illusion, driven by a housing market bubble
- and this way, you'll never be able to pay off the
property.

7. Would you advise someone to refinance their
home?

8. Randy Bett
Investment Realtor/Author/Investor
Real Estate Professionals Inc.
Better Group Real Estate
202-5403 Crowchild Trail NW
Calgary, AB T3B 4Z1
Phone:403-774-7464 Ext:1
Fax:403-208-0082
Toll Free fax:888-711-6801

9. Randy Bett
www.BetterGroupRealEstate.ca