Simply put, to refinance your home is to create liquid cash out of the equity of your home. This is usually done to either consolidate debt or invest in a second property. However, refinancing can also be used to simply access lower interest rates, swap between a fixed or variable rate, renovate or repair your current home, invest in the stock market, make a big purchase, increase loan amortization, or financially support an unexpected financial crisis such as a death or a global pandemic.

By using the refinancing from your home to consolidate debt, you can combine all your debts (credit cards, consumer debt) into one payment with a far lower interest rate than the typical 20% rate most credit cards charge. Alternatively, it is common to refinance to purchase a vacation home or a rental/investment property. This enables the homeowner to use money from the refinancing as the down payment for the second home.

Here’s a client example. A client purchased their home in 2018 at an interest rate of 3.67%. Fast forward to today, and by refinancing, they secured a new mortgage interest rate of 1.50%. The refinancing made it possible for them to a) pull cash out of the equity they built up in their current home; b) invest this money in an income property and c) secure a lower interest rate on both properties for a fixed five-year term.

That said, there are costs to refinancing too and we recommend always discussing your situation with a mortgage broker beforehand. Talk to our team to determine exactly how much this process will cost you, how great the benefits may be for someone in your situation, and what the process is to refinance your home.