What you need to know about refinancing your home in Canada.

Ever since mortgage rates have lowered, refinancing has become much more appealing. Many people are now contemplating whether or not they should refinance their homes.

What is home mortgage refinancing?

It is the process of taking out a new mortgage with new terms and conditions to pay off an existing mortgage loan.

How do I refinance my mortgage?

  • You can break your mortgage contract prior to renewal time to make the most of lower interest rate and have access to the equity you have accumulated.
  • You can add a Home Equity Line of Credit
  • You can blend or extend your existing mortgage prior to renewal to have access to equity in your house without prepayment penalties.

Why should I refinance my home?

There are several reasons why refinancing might be right for you:

  • It can lower your overall costs. The main reason why people want to refinance their mortgages is to lower their borrowing costs by taking advantage of lower interest rates. Breaking your contract for a lower rate can save you money over time depending of your penalty and amount of your mortgage.
  • It can lower your monthly payment. Another reason for refinancing is to lower your monthly payment and give you cash flow. You can do this by taking out another mortgage at a reduced interest rate, or taking a longer amortization depending on your situation.
  • It can get you access equity (cash). By refinancing you can gain access up to 80% of your home value less your mortgage balance. You can use extra cash for renovations or pay off debt that carries higher interest rates or for investment purposes (buying a second home, cottage or investment properties)
  • It can shorten your mortgage term. Refinancing isn’t always to lower your monthly payment. It can be used to shorten the length of the time remaining on your mortgage. You maybe earning more so you may wan to benefit from a lower interest rate and keeping your payment the same by shortening the amortizations

What is the cost of refinancing?

Refinancing is not free. it’s costs same as what you incurred when you purchased your home or got your first mortgage. Closing costs usually include appraisal fees, title insurance, title search, discharge fee, legal service fees and pre-payment penalties if you are re-financing prior to maturity.

Does Refinancing make sense for me?

Think carefully before refinancing to eliminate or consolidate unsecured debt like credit cards or unsecured Line of Credit. When you refinance the mortgage loan is secured debt. If you are refinancing because you could not control your spending habits. Those habits must change or your risk losing everything.

  • Don’t refinance to buy things that depreciated like cars or home furnishing, electronics.
  • Do not refinance to pay off non-essential expenses such as a vacation

Need more help to better understand re-financing?

Contact one of our Mortgage Broker’s today at Canadian Capital Mortgages. We can help you choose the best mortgage refinancing strategy.

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