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When you refinance your mortgage, you are hitting the reset button; paying off what’s left on the original mortgage term. Because you are taking out a new loan, or refinancing, you are starting from scratch, and can determine new mortgage loan terms and the interest rate.

The most popular reason to refinance is to save money with a lower interest rate. But there are a lot of other reasons to refinance too, including lower monthly payments, access to home equity, debt consolidation, paying off the mortgage faster, and making renovations or repairs.

Some Canadian homeowners refinance their mortgage because they do not like their current lender.

When Does It Make Sense to Refinance?

Here are some common reasons to refinance your mortgage.

Lower Your Interest Rate

One of the great things about refinancing is that you don’t need to wait for the renewal date to change lenders and refinance. Thanks to the low interest rate environment, refinancing, even with penalties that lenders charge when you refinance before the renewal date, can make financial sense.

The fact is, breaking your current contract and refinancing can save you tens of thousands of dollars over the life of the mortgage. That far outweighs any penalties you might get hit with.

If you have a variable rate mortgage and you refinance, you can expect to pay a penalty equal to three months interest. If you have a fixed rate mortgage, you will pay the greater of three months interest, or, the interest rate differential penalty (IRD). The IRD is the difference between the original interest rate and the current interest rate.

Lower Monthly Payment

Lowering the interest rate results in lowering your monthly mortgage payment. And most Canadians refinance to lower their monthly payment. If you reset the mortgage clock to lower you monthly payments and refinance with another 25-year term, you are left financing the current balance, which is lower than your initial mortgage.

The downside, you end up taking longer to pay off your home. The monthly payments are lower, which means you have more money in your pocket every month, but it ends up taking longer to pay off the mortgage, which translates into paying more interest.

If You Have an Adjustable-Rate Mortgage

The type of mortgage you have can influence whether or not you refinance. There are a number of different types of mortgages. With a fixed-rate mortgage, the interest rate and monthly payments stay the same throughout the life of the loan term.

If you have an adjustable-rate mortgage, the payments and interest rates will fluctuate. If mortgage rates are increasing or your concerned about future rate hikes, and you have an adjustable rate mortgage, it might make good financial sense to refinance and convert it to a fixed-rate mortgage.

Access Home Equity for Home Repairs or Anything You Like

When you pay down your monthly mortgage payments you are building up equity in the home. You also build up equity if the value of the home increases. Accessing that home equity is another popular reason to refinance.

When refinancing, you can access up to 80% of the home’s value, minus the outstanding mortgage. That money can be used for anything: home renovations or repairs, investing, a new vehicle, children’s education, etc.

You can access the equity you’ve built up in your property by refinancing and taking out a home equity line of credit, home equity loan, or cash-out refinancing.

Debt Consolidation

It’s easy to take on debt that becomes difficult to manage. If you have been hit with unexpected expenses, it might be a good idea to look at refinancing to consolidate that debt.

Having unmanageable debt, perhaps a car loan or credit card bills that charge excessive interest rates, could make it difficult to keep up with mortgage payments and damage your credit score.

Pay Off Your Mortgage Faster

While many seem to focus on how refinancing extends the life of the mortgage, it can also be an excellent way to pay off your mortgage faster, which means paying less in interest, and keeping thousands of dollars in your pocket.

The following three ways can help you to pay off your mortgage faster.

Increase the Amount of Your Payments: Increasing the amount of your payments will help pay off your mortgage faster. With some banks, this comes with a catch: if you increase your mortgage payments you cannot lower them until the term ends. If you’re thinking of refinancing to pay off your mortgage faster, check out the mortgage agreement or ask a mortgage professional what options you have.

Keep Monthly Payments the Same Even with a Lower Interest Rate: If you refinance your mortgage at a lower interest rate, consider keeping the mortgage payments the same. Most homeowners want a lower interest rate because they want to lower their monthly expenses. But keeping the mortgage payments amounts the same will help you pay off your mortgage faster and paying less in interest.

Make “Accelerated” Mortgage Payments: Through an accelerated mortgage plan you essentially pay the same amount each month, but you make the payments more often. This can save you tens of thousands of dollars in interest payments.

Where many Canadian homeowners elect to make mortgage payments once a month, doing it more frequently—semi-monthly, biweekly, weekly, and accelerated biweekly and weekly—helps pay off the mortgage faster.

Accelerated weekly and biweekly payments are the same as making one extra monthly payment each year.

How to Refinance

Check Your Credit

When dealing with traditional lenders, it’s imperative that you have a good credit score. The better the credit, the more likely it is you’ll be able to pay off your mortgage. Banks also only give their best rates to those with high credit scores.

What do the big banks think is a good credit score? Credit is scored on a scale of 300 to 900; traditional lenders will want you to have a credit score of at least 680. That’s higher than the credit score of the average Canadian.

Prepare Documentation

Again, when you refinance a mortgage, you are applying for a new loan. This means you’re starting all over again and will need to provide all of same information you did when you secured your initial mortgage.

You’ll need to have your mortgage statement, property tax assessment, employment letter, pay stubs, and maybe even your CRA Notice of Assessments covering the last two years.

Canadalend.com, Helping You Refinance a Mortgage

When refinancing, a lot of homeowners focus all of their attention on the interest rate. While a low interest rate is important, it’s not everything. The terms and conditions are also important. Getting distracted could mean you end up locked into a new mortgage for longer than you ever wanted. The licensed mortgage refinancing experts at Canadalend.com can show you what’s best for your financial and lifestyle needs.

The mortgage professionals at Canadalend.com art independent, that means they have access to hundreds of different lenders. Many of whom specialize in provide mortgages to those who are self-employed, have unreliable income, are recently divorced, are new to Canada, or have no credit.

If you’re thinking of refinancing your mortgage, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.

What You Need to Know if You’re Self Employed

Because of increasingly strict lending rules being handed down by the big banks and other traditional lenders, it can be difficult, at the best of times, to get a mortgage in Canada. If you’re self-employed it can be even more difficult to secure a mortgage. That’s because traditional lenders don’t like to give loans and mortgages to those with unpredictable, unreliable income streams; they’re seen as being a higher risk to default.

To ensure self-employed Canadians can pay their loans back, banks look at three factors: income, net worth, and credit score. Unfortunately, these tougher mortgage requirements place an unfair burden on the 20% of Canadians who are self-employed.

Part of the problem is that the big banks know that entrepreneurs, independent contractors, and small business owners have difficulty proving their income. On top of that, they understand that self-employed Canadians write off as much as they can to reduce their income and minimize their taxes. The big banks don’t care though.

Documents Required

If you’re self-employed, traditional lenders can ask for any number of documents to prove your income. Pay stubs are the most obvious proof of income, but again, if cash flow is unreliable, big banks will need to see more, such as a tax return or bank statements.

If they’re looking at tax returns to verify income levels, they’ll ask to see a Notice of Assessment, which you can get from Revenue Canada. Lenders will usually ask to look at your income for the past two or three years, which the Notice of Assessment will reveal. Admittedly, some traditional lenders will approve someone who is self-employed for a mortgage with less than a three-year history of income. But there are strings attached; the mortgage will come with a much higher rate and restrictive terms and conditions.

In addition to the Notice of Assessment, the big banks will want to see other supporting documents when you apply for a mortgage.

They can include:

• Proof that you are the owner of the business
• Financial statements for the business
• Contracts showing expected revenue for this year and next year
• Documents showing your HST and/or PST is paid off
• Both your personal and business credit scores
• Written proof that your down payment is not a gift

Lending Standards for Self-Employed

As already mentioned, the lending standards that traditional mortgage lenders impose on those who are self-employed are onerous. This includes looking at tax returns over the last two or three years. But, as we already know, because of tax deductions, how much you make each year may not actually be reflected in the net (take-home) income.

Debt-to-Income Levels

Lowering your taxes is a great idea if you’re self-employed, but traditional mortgage lenders see this as a disadvantage. Big banks calculate your debt-to-income levels, which measures how much of your income is used up to service your debt. This is done by looking at your net income, which is the after-tax amount you take home.

If, like virtually every self-employed Canadian, because of deductions, you have a lower net income. This means your debt ratio will be higher, and most likely, your mortgage application will be rejected.

Higher Down Payment

Banks may tell you that you can get a mortgage, but the terms and conditions will not be as favourable as if you were not self-employed. If you work for someone else, you need to save up a 20% down payment.

If you’re self-employed though, the banks penalize you by saying you need to have a minimum down payment of 30% or even more. It’s tough to save up a 20% down payment, asking for a 30% down payment means most self-employed Canadians will never qualify for a mortgage.

How to Improve Your Chances of Getting Approved for a Mortgage

Get Your Documents Ready/Be Organized

Being self-employed, you know how important it is to keep your records up to date, especially when it comes to doing your taxes. The same can be said when it comes time to apply for a mortgage. Have all supporting documents that prove your income, net worth, and credit score close at hand.

Don’t Miss Tax Payment

When you work for someone else, all of your tax deductions come off before you get paid. When you’re self-employed, you’re 100% reliable for make all of those deductions and paying your taxes and GST/HST on time.

Your Notice of Assessment from the CRA will show whether or not you owe taxes or are up to date. Keeping up with your tax obligations shows lenders you are responsible.

Keep a Good Credit Score

A good credit score is another way to prove that you are good with paying bills on time. The higher the score (300 to 900), the more reliable you are. The lower your credit score, the higher the odds are that you’ll default on a mortgage or loan.

To get a mortgage with the best rates and terms, traditional mortgage lenders will need you to have a credit score of at least 680. The average credit score in Canada is 650. A credit score of 650 or below makes it more difficult to qualify for a mortgage. If you are approved, you’ll be hit with paying much higher interest rates.

A low credit score will impact more than just a mortgage application. It will make it difficult to rent an apartment, get a car, or secure any kind of loan.

To get and maintain a high credit score, make bill payments on time.

Canadalend.com, Helping Self-Employed Canadians Secure a Mortgage

If you’re self-employed and thinking of getting a mortgage, it can be difficult to determine which lenders will even give you a loan, or which ones will provide you with the best rates and terms. The self-employed mortgage professionals at Canadalend.com can help.

Because the mortgage experts at Canadalend.com are independent, they have access to hundreds of different lenders. Many of whom specialize in providing mortgages to those who are self-employed, have unreliable income, bad credit, or even no credit. Traditional lenders on the other hand, will only offer you their financial products, even if it’s not in your best interest.

To find out what kind of mortgage you qualify for, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.

Thanks to stricter lending rules, it’s getting more and more difficult to even qualify for a mortgage. Once you do, you’re not out of the woods yet. When you secure a mortgage it comes with a term and amortization period. The amortization period is the length of time it takes to pay off the mortgage. The most popular amortization period in Canada is 25 years. There’s also the mortgage term. That’s the length of time you that you locked into a mortgage rate, as well as other terms with a specific lender. A typical mortgage term in Canada is five years.

When the mortgage term ends you need to sign up for another term. It’s a common misunderstanding that you need to sign a new mortgage term with the same lender. This is not true. You can either sign on for a new term with your current lender or you can shop around, hoping to get a get a better rate and terms with another lender.

While some homeowners may wish they could just stick with the same mortgage terms for the entire amortization period, renewing a mortgage term every one, three, five, or 10 years, means you can find the best mortgage terms and rates that suit your ever-changing lifestyle and financial needs—and the changing dynamics in Canada’s dynamic housing market!

Below are four things you should consider before renewing your mortgage.

1. Renewal Statement

If you currently have a mortgage with one of the big banks or any other federally regulated financial institution, the lender will send you a renewal statement at least 21 days before the end of the existing mortgage term.

There is a chance your current lender decides it doesn’t want to renew your mortgage. If this is the case, they need to notify you at least 21 days before the end of the mortgage term.

No matter which camp you’re in, that doesn’t give you a lot of time to act. That’s why it’s important to get a head start looking around for a better mortgage term. The better informed you are the greater your chances are of renewing the mortgage with better rates and terms.

The renewal statement will contain the same kind of information that you would find on your current mortgage. This includes the balance remaining or the principle at the renewal date, the interest rate, terms, the payment frequency, and any fees or charges.

Most lenders will also include a mortgage renewal contract with the renewal statement, in the hopes you will just sign on for the same rates and terms.

Don’t do it.

Simply signing on the dotted line and returning the new mortgage term might sound easy, but it can only be costly. Chances are excellent you could get a lower rate and better terms with a new lender. After all, they want your business.

2. Your Mortgage Needs

If your mortgage term is coming to an end in the coming months, it’s the perfect time to review your mortgage needs and make sure your current lender is meeting your needs. Life is not static, there is a good chance your needs have changed.

How can you tell if you need to find a new lender? Ask yourself:

• Has my financial situation changed? Can I increase my payments to help pay off my mortgage sooner?
• Can I change the payment frequency, switching from monthly to bi-weekly, or even weekly? Doing so means paying off the mortgage faster and paying less in interest.
• Are you happy with the kind of service your current lender provides?
• Have you accumulated too much high-interest debt (credit card, car loan) and want to consolidate with a larger mortgage?

3. Shop for Better Interest Rates

The biggest reason why people shop around for a new lender when their mortgage comes up for renewal is to find better interest rates. After all, lower interest rates mean more money in your pocket every month and less going to the banks.

Don’t wait until you get the renewal letter in the mail. Shop around, find a lender that will offer you the kind of rates, terms, and conditions that better suit your lifestyle needs.

Best of all, you don’t need to stick with traditional lenders. Private lenders are independent, meaning they do not need to adhere to the same strict rules federally regulated banks and trust companies do. They provide the same kind of services that traditional lenders do, but they also offer you better options, which provides you with more freedom to choose what’s best for you.

4. Switch to New Mortgage Lender

If your current lender will not give you a better, discounted interest rate, lower than the one quoted in your renewal term letter, think of switching to a new mortgage lender. Just be sure to weigh out your options.

Traditional lenders, like Canada’s big banks, will only try and sell you their own financial products, even if it’s not in your best interest. Private lenders, because they are independent, have access to hundreds of different lenders and are looking out for your best interest.

When negotiating with a new lender, tell them what your current lender offers and about offers you’ve received from other financial institutions or mortgage brokers.

Finding the lowest interest rate is important, but there are other factors to consider too. If your financial position has changed, you may want different terms than what was originally agreed to or your current lender is offering.

The lender works for you. Make sure you get what you need.

Canadalend.com, Helping You Refinance a Mortgage

If your mortgage is coming up for renewal and you want to see if you can find a lender with better rates, terms, and conditions, contact a licensed mortgage professional at Canadalend.com.

Because the mortgage experts at Canadalend.com are independent, they have access to hundreds of different lenders. Many specialize in providing mortgages for those who are self-employed, have unreliable income, are new to Canada, or have no credit.

If you’re thinking of refinancing your mortgage, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.

Shopping for a mortgage can be nerve-wracking and navigating the ins and outs of actually securing a mortgage is just the beginning. Once you qualify you have to figure out what kind of mortgage you want, and that can be downright confusing.

What is the mortgage term? What about mortgage rates? Is it better to go for a variable mortgage or one with a fixed term? What about payment options and other terms and conditions?

Most home buyers think the best mortgage rate is the one attached to the lowest rate. This isn’t always the case. The best mortgage is the one that suits all of your financial and lifestyle needs.

Mortgage Term

When you qualify for a mortgage you need to determine what the term and amortization period are going to be. The amortization period is the amount of time it takes you to pay off the mortgage. The most popular amortization period in Canada is 25 years.

The mortgage term though is entirely different. It represents the amount of time you are locked into the current terms and conditions (mortgage rate, repayment options, etc.) with the current lender. The average mortgage term in Canada is five years; though it can be shorter or much longer.

A shorter mortgage term means you don’t have to wait as long to renegotiate your mortgage without paying any fees. The benefits of a longer-term mortgage, however, is that you are locked in at an interest rate you like for a longer period of time.

Once the mortgage term ends though, you can either sign back up with the original lender or you can shop around for a mortgage with better rates, terms, and conditions.

Remember, you’re the client and because of the competitive mortgage marketplace, lenders should be making every effort to keep or gain your business.

Mortgage Rates

When it comes to looking for a mortgage, most home buyers zero in on the mortgage rate, which isn’t a surprise—that’s the interest rate you pay out during the life of the mortgage. A half point on interest can translate into either paying out, or saving, tens of thousands of dollars during the amortization period.

What can affect mortgage rates? There are some factors you can control, others, you can’t.

For the most part, your financial health is in your control. There are a lot of rate-influencing factors that are out of your control, though. This includes the strength of the housing market, which impacts supply and demand. In a hot housing market, mortgage rates will be higher than they are during a correction in the real estate market.

Other factors impacting mortgage rates include the strength of the economy, inflation, the Bank of Canada’s key lending rate (which impacts interest rates for consumer loans and mortgages), and the bond market.

Variable vs. Fixed

It could be tough to decide whether or not you want a variable rate mortgage or fixed mortgage. If interest rates are going up, you may want to lock into a fixed-rate mortgage. This provides the certainty of know exactly how much of the principle you’re paying down every month and how much goes to interest.

On the other hand, if you think rates are going down, you could opt for a variable rate mortgage. With a variable mortgage, the interest rate fluctuates with the lenders prime rate. In a soft economic environment, this might be a good way to go, since there is less of a chance of rates going up. But the banks can change their rates whenever they like, which adds a great amount of uncertainty.

Prime Rates

What is the prime rate? The prime rate, which is also known as the prime lending rate, is the annual interest rate Canada’s big banks and other traditional financial institutions use to set interest rates for variable mortgages and loans.

The prime rate is influenced mainly by the key lending rate set by the Bank of Canada. Also known as the overnight lending rate, it is what major financial institutions charge when borrowing or lending (for one day) amongst themselves.

When the Bank of Canada raises that rate, banks pass on that increase to you in the form of higher or lower prime rates.

Terms and Condition

There’s more to a mortgage than just interest rates. Some key factors mortgage shoppers should consider are:

• The penalty for breaking a mortgage
• Prepayment options
• Porting rules
• Refinance options
• Does the mortgage come with a home equity line of credit?
• What is the rate hold period?

Prepayment Options

Having options for prepayment in your mortgage can save you a lot of money. Mortgage prepayments allow you to increase your mortgage payments or pay off the mortgage, without incurring a penalty.

On a monthly prepayment basis, the increase is a percentage of the original monthly payment. A lump sum provision allows you to put any money you have towards the mortgage principle without penalty.

Making additional payments on a mortgage will reduce the amortization period and how much you pay in interest. Some mortgages also allow you to skip a payment.

You may not think prepayment options are all that important, but you never know what kind of financial situation you’ll be in in three, five, or 10 years. That’s why it’s important to keep prepayment options in mind when determining what kind of mortgage term to get.

Porting and Assuming Your Mortgage

Are you thinking of selling your home? If so, you might want to look at portable and assumable mortgages. A portable option allows you to transfer your current mortgage balance, interest rates, terms and conditions.

An assumable mortgage allows you to take over someone else’s mortgage and their property. The terms of the original mortgage have to stay the same.

Canadalend.com, Helping You Get the Best Mortgage

There is no one-size-fits-all approach when it comes to mortgages. Everyone has different needs. The licensed mortgage professionals at Canadalend.com will ensure you choose the best mortgage with the best rates and terms to suit your needs.

How can we help you secure a mortgage with better rates and terms than Canada’s major banks? Because the mortgage experts at Canadalend.com are independent they have access to hundreds of different lenders. Big banks will only offer you their own financial products, even if they aren’t right for you.

Some of the lenders we deal with specialize in providing mortgages for those who are self-employed, have unreliable income, are new to Canada, have no credit, or have failed the mortgage stress test.

To see what kind of mortgage you qualify for, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.