The majority of house owners attempting to refinance a mortgage are looking to accomplish one among the following:
- Consolidate Debt (credit cards/loans),
- Taking advantage of lower interest rates,
- or Access funds for other important projects, such as
- Home renovations investment/rental property,
- Buy an investment/rental property,
- Planning for your children’s future education, or
- Dreaming about great vacation.
Put your home equity to work for you…
You have worked hard to build the equity in your home and now might be the time to get the equity, working for you. You may qualify to up to 95%* value of your home (Normally 80%) – One of your biggest assets in life.
1. To take advantage of low-interest rates
Don’t let penalties deter you; first, know the numbers. Breaking your contract for a lower interest rate can save you money over time, depending on the penalty and the size of your outstanding mortgage. If you hold a variable rate mortgage, then expect to pay a penalty of three months interest, and if you hold a fixed rate mortgage, then you will pay the greater of three months interest or interest rate differential penalty (IRD).
2. To access equity (cash) in your home
Through refinancing, you can increase up to 80 percent of your house's value less any outstanding mortgages. That’s extra money for investment opportunities, home renovations, or your children’s education. There are several ways to access this equity including breaking your mortgage, taking on a home equity line of credit or blending and extending your mortgage to your current lender.
3. To consolidate debt
If you have enough equity in your home, you will be able to pay-out high-interest debt through a refinance. For example, if you have a number of outstanding debts, such as a car loan, a line of credit, or credit card bills, you may be able to consolidate all of the debt through the variety of refinancing options available.
Methods of refinancing your mortgage
There are several options available to you when considering a refinance which include: breaking your mortgage contract early, taking out a home equity line of credit or blending and extending your mortgage to your current lender.
1. Break your existing mortgage contract early:
You would consider breaking your mortgage early if you wanted to obtain a lower interest rate or access equity from your home. In this case, you can do away with your existing mortgage and take on a brand new one with any lender.
2. Add a home equity line of credit:
A home equity line of credit gives you access to the equity in your home at your own discretion. You are responsible for interest-only payments each month on the outstanding balance. You can access a home equity line of credit through your existing lender and a small subset of other lenders.
3. Blend and extend your existing mortgage:
Your current mortgage granter might offer you a ‘blended rate’; essentially, a ‘blend’ of your current mortgage rate plus any additional money you borrow at current market rates. Blended rates are almost always higher than the most competitive mortgage rates on the market, so make sure you compare the blended rate against the savings if you break your mortgage.
We work with many lenders to get you the best rate, best term and the features you want so you can use the equity in your home. It’s just one way we can get your mortgage working for you!
FAQ’s that is common about refinancing Mortgage
The cost to refinance your mortgage depends on the strategy you use to access equity or lower your interest rate. No matter which strategy you use you will always incur legal costs as a lawyer must change the financing on title. The good news is if your mortgage balance is greater than $200,000, many brokers and/or lenders will cover this cost. If you are breaking your mortgage in the middle of your term to access equity or lower your interest rate your lender will charge you a prepayment penalty. Well, for fixed mortgage rates this penalty is the larger of 3 months interest or the Interest Rate Differential payment (IRD). For variable mortgage rates this is simply three months interest.