How to Refinance Your Mortgage in Canada?
If you’re interested in refinancing your mortgage, you have a few different options to choose from:
- Get a HELOC – With a HELOC, you can gain access to your home’s equity in cash and use it as you see fit. You’ll only be responsible for paying down what you spend on the HELOC, and you’ll likely have a very low-interest rate. This is a great way to pay off debts with higher interest rates.
- Cancel your current mortgage Canada – This will actually eliminate your current contract for your mortgage and replace it with the refinanced mortgage. In this case, you’ll end up paying the penalties we discussed earlier, but it may still be worth it for a better interest rate and terms.
- Get a Blended Rate – Basically, with a blended rate, your current mortgage provider would blend your current interest rate with the interest rates on any additional money you borrow at current market rates. In this case, you’ll likely see a minor increase in your interest rate, as blended rates are almost never quite as competitive as current market rates. However, if you have a high-interest rate that you’re trying to bring down, this could help you out.
How much does Refinancing Cost Canada?
Your refinancing costs are going to differ depending on how you decide to refinance your mortgage. Whichever method you choose, the costs you should consider are appraisal fees, title search, insurance, legal costs etc.
If you’re taking out a HELOC, you likely won’t have any additional costs besides paying back what you spend on your line of credit. However, if you’re breaking your mortgage to get access to your home equity or to get a lower interest rate Canada, you can expect to pay a penalty of at least three months’ interest or an IRD payment (as we mentioned earlier).
5 Reasons Why You Should Refinance Your Mortgage
There are many reasons to consider mortgage refinancing to replace your existing mortgage
loan with another lender under different terms.
A borrower in Canada may consider refinancing his or her loan for diverse reasons. If you’re not sure whether you should go for a mortgage refinance or not, consider using the services of best mortgage brokers.
The following are some of the different reasons you should consider refinancing.
Build equity faster
If you are in a position to increase your monthly payments — because of an increase in salary or a fortune — you may want to switch from a 20-year mortgage to a 15-year mortgage.
This switch allows you to build equity on the house quickly. If you consider a bi-weekly refinance option, you’ll quickly build up equity on the house without putting out a large amount of money each month.
Change the loan type
With lower mortgage rates, you can get a fixed mortgage rate for more peace of mind. If you wish to move from a variable mortgage rate to a fixed rate mortgage rate
(due to its added stability), you should consider refinancing. If your variable rate is adjusting, you should consider refinancing and getting a fixed rate mortgage.
Use the equity you have built up in your home
If you have built up equity in your home (the difference between the amount owed and the home’s worth), you can use cash-out refinance loan to tap into the equity.
You can use this option to make larger purchases, pay off credit card debts or send a child to college. This refinance option is a perfect way to become debt free.
Pay off the mortgage sooner
If have landed a bonus at work or inherited money and you wish to pay off your mortgage sooner, you should consider mortgage refinancing offered by Canadian mortgage brokers. With refinancing, you can choose to refinance down from a 30-year loan to a 20-year loan.
When you pay off your mortgage loan earlier, you save a significant amount from interests over the life of the loan.
You find better mortgage rates
When you first obtained your mortgage, you may have had higher rates than the best mortgage rates being offered today. By lowering your mortgage rate from a higher rate, you can save thousands over the life of your mortgage