During the early days of the mortgage business, brokers would require a lot of paperwork…
Now you can listen to our blog post, “How to Refinance Your Mortgage in Canada” while on the go.
A mortgage is a form of loan that allows you to borrow money from a bank or other financial institution, and use it to purchase a property. A mortgage can be used for the purchase of residential, commercial, or industrial properties.
The cost of borrowing money for a mortgage is typically lower than any other form of borrowing. This means that the monthly payments on your mortgage are typically lower than any other type of loan. Mortgages are typically repaid in regular installments over many years, but there are also mortgages that allow you to repay your debt sooner if desired.
But, what if you are short on funds or your mortgage agreement is not working for you anymore? In such situation, you can go for mortgage refinance.
What is Mortgage Refinance?
A mortgage refinance is when you pay off your current mortgage and replace it with a new mortgage. The new mortgage may have a higher mortgage balance to borrow more money, or it may have a different interest rate, term, or mortgage type. A mortgage refinance allows you to replace your old mortgage. It is needed when you want to change certain specifics of your mortgage.
Why Should I Refinance My Mortgage?
There are various reasons why you might want to refinance your mortgage. For example, if you have a variable rate and interest rates have increased, then it could be beneficial to refinance your mortgage. You might also want to refinance your mortgage if you want a shorter term or if you need more cash flow in order to pay off other debts or take care of other expenses.
A mortgage refinance is needed whenever you want to make significant changes to your mortgage contract, whether the mortgage is ready for renewal or not. You should get a mortgage refinance when you want to:
- Increase the mortgage amount to borrow money
- Changing mortgage amortization or mortggae term length
- Changing mortgage rate before the end of your term
How To Refinance Your Mortgage in Canada?
If you have decided to pull the trigger on refinancing your mortgage, then fill out your application and make sure you gather all the relevant documentation that is required. Approach each lender and ask them all the required documents you will need, including proof of income and tax documents. This is where it helps to have a mortgage broker or any professional who can help you with these documents and submit your application for you.
If you get approved, do not just sign immediately. You should read the terms and conditions carefully, especially the details related to cost, payments and interest rates. If there is anything you do not agree with, then ask it straightaway.
A mortgage broker may be able to help here and negotiate on your behalf but it is perfectly acceptable to negotiate directly with the lender yourself. After all, a percentage point off and your interest rate may give you enough room to be able to better afford the closing costs.
Once you know what mortgage refinance is, how it works, and how you can apply for it, you may have decided whether it is right for you or not. If you have made your decision against it, then know that you are not alone. Many Canadians do not deem it fit for their financial needs. So, for this, we have mortgage refinancing alternatives for you that you can use.
How Much it Costs to Refinance?
Legal fees, home appraisal fees, and mortgage registration fees must be paid, however in some cases you may be able to avoid prepayment penalties and mortgage discharge fees. If you continue working with the same lender, the mortgage discharge cost can be avoided. You must pay a mortgage discharge fee if you decide to refinance with a different lender instead of your present one.
Mortgage penalties are waived if you wait until the end of your term to refinance. If you want to refinance at the current mortgage rates, there will be penalties if you do so before your term is up. On the other hand, you have the option to blend and prolong your mortgage rate, which combines it with current rates. Although your interest rate won’t be fully updated to current interest rates, you can avoid incurring mortgage penalties this way.
Alternatives to Mortgage Refinancing
You have a few more options to think about if refinancing is too expensive:
Combine and broaden: Through a blend-and-extend option, some lenders let you renegotiate your interest rate before the end of your mortgage term. By combining the new, lower interest rate with the old one and avoiding prepayment penalties, this enables you to lengthen the term of your current mortgage at a lower rate.
Request a HELOC: A home equity line of credit allows you to borrow money using the equity in your home as collateral (HELOC). The maximum credit limit is 65% of the market value of your home, and you must have at least 20% equity in your home to qualify. You don’t have to break your mortgage or suffer prepayment penalties because you can get a HELOC in addition to your current mortgage. A HELOC will normally have higher interest rates than a refinance of your mortgage.
Purchase a second mortgage: Another way to access the equity in your house is through a second mortgage. It is issued in addition to your principal mortgage, preventing prepayment penalties. The interest rates are greater than those of a HELOC or refinance, though.
Looking to Refinance or Need Some Quick Cash? Let Us Help!
Are you struggling with your financial needs and need some extra cash? Or you want to refinance and looking for best options? Lionsgate can help. Just fill out the form below, letting us know all your cash or mortgage requirements and we will find the best lender for you. Amazing thing? The process is free and you can quit it at any time.
We have a team of experts that analyze your requirements and pick the best lender for you, with prudent advice.
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