Refinancing a mortgage means paying off an existing loan and replacing it with a new one which has different terms and conditions
There are many reasons why homeowners refinance; here are some of the most commons reasons to refinance your mortgage:
1. To take advantage of changing interest rates:
Don’t let penalties deter you; first, know the numbers. Interest rates change. Breaking your contract for a lower interest rate can save you money over time, depending on the penalty and the size of your outstanding mortgage.
At other times, there is a risk that Canadian interest rates will change in the future, and you may want get a longer (or shorter) term than you have in order to prepare for the change. If you hold a variable rate mortgage, then expect to pay a penalty of three months interest, and if you hold a fixed rate mortgage, then you will pay the greater of three months interest or interest rate differential penalty (IRD).
2. To access equity (cash) in your home:
By refinancing, you can access up to 80% of your home’s value less any outstanding mortgages. That’s extra money for investment opportunities, home renovations, or your children’s education. There are several ways to access this equity including breaking your mortgage, taking on a home equity line of credit or blending and extending your mortgage with your current lender.
3. To consolidate debt
If you have enough equity in your home, you will be able to pay-out high-interest debt through a refinance. For example, if you have a number of outstanding debts, such as a car loan, a line of credit, or credit card bills, you may be able to consolidate all of the debt through the variety of refinance options available.
There are several options available to you when considering a refinance which include: breaking your mortgage contract early, taking out a home equity line of credit or blending and extending your mortgage with your current lender.
The cost to refinance your mortgage depends on the strategy you use to access equity or lower your interest rate. No matter which strategy you use you will always incur legal costs as a lawyer must change the financing on title. The good news is if your mortgage balance is greater than $200,000, many brokers and/or lenders will cover this cost.
Thinking about breaking your mortgage early? Speak to a broker today for the best refinance options available!Apply now
At the end of your mortgage term, so long as you still owe a balance, you will need to renew your mortgage for another term. With each mortgage renewal comes the opportunity to assess your current mortgage and compare it to any new financial goals you may have.
Your current mortgage provider will send you a renewal, however the may not necessarily offer you the best option at the time. Unfortunately, by signing back the renewal letter many people miss out on the chance to take advantage of their position at this critical time of home ownership.
This is the time when your equity grows substantially. Your principal balance will have decreased and the value of your home will have gone up, meaning you have a lot more financial flexibility to consider.
If you want to ensure all of your needs are met, we suggest taking a proactive approach with your next mortgage renewal by considering all your financial goals and outlining your mortgage needs. It is suggested you begin your research 120 days before your renewal deadline.
You can always try to negotiate a better rate with your currently lender. Switching providers will require a little more paperwork, but you will find that doing so will give you access to better mortgage rates and a wider variety of mortgage products. Just be prepared to submit a mortgage application, as the new lender’s qualifying criteria might be different from that of your current lender.
If you are ready to start the mortgage renewal process today, speak to a mortgage broker! They can help you find the best mortgage rate, term and product for you.Apply now