Should I Refinance My Mortgage?

Posted on 23rd May 2017

How Do You Know If You Should Refinance a Mortgage?

Refinancing a mortgage is when you pay off the existing mortgage and set up a new mortgage. Homeowners can choose to refinance with their current lenders or find a different lender. There are a lot of reasons to consider when deciding whether or not to refinance a mortgage. While most people chose to refinance simply to take advantage of lower interest rates, there are other things to consider too, including amortization periods, penalties, hidden costs, and switching to another lender.

The fact is, homeowners should consider refinancing their mortgage if it makes sense to do it. How to tell exactly when or if it’s time to refinance a mortgage is a personal decision that should be decided after considering a lot of different factors.

Ultimately though, property owners refinance to improve the terms of their current mortgage. The first step is to determine what you want to accomplish. It’s time to refinance a mortgage if you want to:

  • Take advantage of low interest rates
  • Replace an adjustable mortgage with a fixed-rate mortgage
  • Increase the amortization period to lower mortgage payments
  • Shorten the amortization period to pay off the mortgage more quickly
  • Consolidate high-interest credit-card debt
  • Access the equity in the home to buy investments, purchase another property
  • Tap the equity to pay for renovations, or tuition, or increase retirement income

That said, it’s a good idea to review the mortgage every year. That’s because Canadian homeowners spend thousands of dollars on their mortgages; money that could be saved or put to better use elsewhere.

Nothing is free though; refinancing a mortgage has its costs. There are penalties and fees associated with refinancing a mortgage. The penalty for refinancing a mortgage is usually three months’ interest at the current rate.

But banks want to keep their clients, so there is a lot of leeway. For example, if you discuss refinancing a mortgage with another lender and tell them you want to move the rest of your banking business their way (RRSPs, accounts, etc) they may pay off some or all of the penalties.

Even if the closing costs and penalties are not covered, this doesn’t mean it’s not a good idea to refinance a mortgage. It’s just important to weigh the costs and be sure you’re making a good decision.

What Are the Different Ways of Refinancing a Mortgage?

There are a number of options available to Canadian homeowners looking to refinance their mortgage: breaking the mortgage early, taking out a home equity loan, and a home equity line of credit (HELOC).

Breaking the existing mortgage early

One of the most popular reasons for breaking a mortgage early and refinancing is to take advantage of lower interest rates, consolidate debt, or access the equity in the home. Finding a lower interest rate and consolidating debt will help homeowners lower their interest payments and save money. The lower interest rate will also make it cheaper to borrow money for renovations, etc.

In these cases, it’s a good idea to renegotiate the existing mortgage and take on a new one with a new lender; one that understands your short and long-term financial needs.

Add a Home Equity Line of Credit

For those thinking of making renovations on their home or paying for their child’s tuition, an HELOC is an easy and inexpensive way to borrow money. An HELOC is basically a revolving line of credit that gives homeowners access to the equity they’ve built up in their home. Equity is built up in a home every time a mortgage payment is made and when the value of the home increases.

An HELOC is different from breaking a mortgage. With an HELOC, property owners are only responsible for the interest payments each month on the outstanding balance. When a mortgage is broken and refinanced, the homeowners need to make set monthly payments on the amount borrowed, just like with the original mortgage.

If refinancing a mortgage sounds like it might be the right choice, talk to a mortgage lender near you and determine what the best options are. Just remember, do the math and make sure you’re getting what you want with the refinanced mortgage., Helping Canadians Consolidate Debt

There is a lot to consider when deciding whether or not it’s a good time to refinance a mortgage. The mortgage experts at can help you refinance your mortgage.

Our licensed mortgage agents will explain the refinancing process and help decide if refinancing a mortgage is a good option. If the time is right for you to refinance the mortgage, we’ll help you find the lender best suited to your lifestyle needs.

Because the mortgage professionals at are independent, we have access to hundreds of different lenders. Canada’s big banks will only offer you their products; whether they’re best suited to your needs or not.

This gives you the peace of mind to know that is helping you build value and save money.

To find out what your mortgage refinancing options are, contact today. Or apply online and a lending specialist will help you set up an appointment for a free personal consultation at your earliest convenience.

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