Need access to your Home Equity?

Whether you need extra cash to pay off debt, renovate your home, travel, or whatever the reason may be. With mortgage rates as low as they are, this is a great time to refinance.  In the past, most people have resorted to a second mortgage or home equity line of credit to access their equity. More often than not these days, its more beneficial to pay out your first mortgage, incur a penalty, and refinance an increased amount at a lower rate. Take a look at this example of a client SharieMarieMortgageTeam recently helped gain access to their equity.

Bob is currently amortized about 27 years on his mortgage of $270,000. He has been in this mortgage for just over 3 years and is paying an interest rate of 5.29%. Since he has a penalty of almost $9000 to pay out his mortgage early, he went to his financial institution to discuss a second mortgage to access some of his equity. Bob was quoted a second mortgage for $40,000 at 7%, or a blended rate mortgage at 4.50% (for another 5 years) for the entire $310,000. Since the blend and extend option saves Bob the $9,000 penalty, he was leaning towards this option. This is what his payments would be:

Currently for the $270,000 - $1490/month

Option A - Keep current mortgage in place 2 more years and take a second mortgage - $1770/month

Option B - Lock in 5 more years at 4.50% for total $310,000 - $1565/month

Bob approached our team to double check his options and make sure he was making the best choice financially for him. We recommended Bob refinance his current mortgage to $319,000, giving him the equity he wanted and including the penalty in his new mortgage to avoid having to come up with the cash out of his own pocket. 

Option C (SharieMarieMortgageTeam Solution) 

$319,000 at 3.29% for 5 years keeping amortization the same as it currently is - $1390/month

So as you can see, our option provided Bob with a lower rate to lock in at for another 5 years and gave him access to his equity. Even though he incurred a penalty of $9000, his monthly payment is actually $175 less. Saving him almost $11,000 over the five year term, and freeing up monthly cash flow for Bob. This solution worked well and met Bob's needs. This is not necessarily always the best option for people as it does increase the balance owing on the mortgage, but in this situation it was ideal for Bob's needs. 

If you'd like to see how you can access equity and free up monthly cash flow, call SharieMarieMortgageTeam today.