This article was originally published on RBC Discover & Learn and has been republished here with permission.
If you own a home, there’s a good chance its value has increased over the last few years. By refinancing your home, you may be able to use that value to receive cash in return.
If you have increased equity in your home, you may be able to get cash back for the difference between the current value of your home and your original mortgage amount (as long as you keep at least 20% of equity in your home). This cash difference can go a long way toward funding your goals.
When it Makes Sense to Refinance
Your mortgage offers a low-interest borrowing option, often making it a smart way to access a large sum of money.
Here’s how refinancing might make sense for you:
- You can achieve your goals sooner.
- If you are looking to make a large purchase or cover a major expense, such as paying for a child’s tertiary education, renovating your home or taking a dream vacation, these events typically require years of saving or the use of higher interest rate credit. If you have equity built in your home, refinancing your mortgage can help you achieve your goals much sooner.
- You can pay off your existing debt.
- An investment advisor can help you use the equity in your home to pay off debt or you may choose to invest in other options that make sense for you.
How to Assess the Value in Your Home
Not sure if you’ve built up the equity you need to make it worth refinancing? There are a few ways to assess the value of your home:
- Speak with a local realtor or valuator who can do a comparable market analysis and home assessment for you. If they’re familiar with the area (which they should be), they can give you an accurate reading of how much you could sell your home for today.
- If you’re really serious about refinancing your home, it’s best to get a professional appraisal through the lender you’re considering refinancing with. An RBC Mortgage Specialist can advise on getting this appraisal done and let you know the amount in cash you can get back once you refinance.
Is Refinancing Your Best Option?
Refinancing your home can open up some great possibilities for you and your family. Considering all the factors — the value of your home today, the closing costs, how long you intend to keep your home, and the importance of the goals you are thinking of funding — can help you make your decision.
If refinancing looks like the right move for you, talk to an RBC Mortgage Specialist to get started today.