Mortgage Refinancing, Is It Worth It?

Mortgage refinancing in Canada refers to the process of replacing an existing mortgage with a new one, typically with a different lender and/or with different terms and conditions. The goal of refinancing is usually to secure a lower interest rate, reduce monthly payments, or change the terms of the mortgage to better suit the borrower’s needs. However, that is not the case today most clients are looking to improve cash flow and reduce stress, so rate is not nearly as import to them. The may what to increase amortization and consolidate other debts. Payment is king, not interest rates all the time.

Top five reasons to refinance.

For many Canadians, their home is a terrific repository of wealth. Home equity can build nicely by chipping away at payments and through increasing home values. Accessing home equity through a refinance (min 20% home equity) has for years been an easy, low-cost way to get needed funds. Various new mortgage rules and “stress-testing” has made refinancing more complicated, but it’s a strategy that continues to make good financial sense for certain homeowners that qualify.

5 Reasons to Refinance

1. New beginnings: If you have too much high-interest debt, you may be able to roll everything into one manageable monthly payment on a low-interest mortgage. Then you get a financial re-set and can potentially save thousands of dollars in interest.
2. The house you’ve dreamed of: If you’re not quite ready to sell your primary residence, Refinancing may be the solution for you. If you’ve found the perfect cottage, chalet, or the retirement home of your dreams, refinancing may be the way to make that purchase happen now.
3. Renovate: Renovating your home is often a less expensive option than moving. And the right renovations can improve the quality of your life and increase the value of your home.
4. Wealth building: A rental property can give you a great wealth building opportunity and a source of retirement income. Or you may want to invest in a new business venture.
5. Large expenditures: You may be able to get the funds you need for major expenses (tuition, wedding etc.): a much better strategy than loading it all onto high-interest credit cards.

Along with 5 reasons to refinance, here are 5 refinancing tips.

Even though refinancing may hurt your credit score at first, it may benefit you in the long run. Mortgage refinancing can lower can debt and/or your monthly payments which is what lenders like to see. If your score does take an initial dip, it will most likely bounce back within a few months.

5 Tips to Refinancing

Here are some steps you can follow to refinance your mortgage in Canada:

1. Assess your financial situation: Before you refinance, take a look at your current financial situation and determine if refinancing would be beneficial. Factors to consider include your current interest rate, the remaining term on your mortgage, and any changes to your income or debt levels.
2. Shop around:  Use a Mortgage Broker, don’t assume that your current lender will offer the best rates and terms. Let the broker shop around and compare rates and terms from multiple lenders, including banks, credit unions.
3. Seek professional advice: Consider seeking the advice of a financial advisor or mortgage broker to help you determine the best course of action for your specific situation.
4. Consider the costs: Refinancing can come with costs, such as appraisal fees, legal fees, and penalties for breaking your current mortgage agreement. Make sure you understand these costs and factor them into your decision-making process.
5. Choose the right type of mortgage: There are several types of mortgages available in Canada, including fixed-rate mortgages, variable-rate mortgages, and combination mortgages. Choose the type of mortgage that best suits your needs and financial situation.

By following these steps, you can help ensure a successful mortgage refinancing experience in Canada.

We have access to dozens of lenders, including alternative lenders. They are not subject to the new rules and have less stringent qualification guidelines. If you are interested, we can provide you with a personalized analysis so you can determine whether a refinance makes sense. Our job is to help you pay down debt, build wealth, create financial security, and enjoy life to the fullest!

Call us if refinancing appears to be a good option for you, we will be here to guide you through the ins and outs. Making sure you know what’s best for you!