“The Benefits of Mortgage Refinancing: Why You Should Consider It”

Mortgage refinancing is the renegotiation of your mortgage, which can be useful for a variety of reasons. Essentially, it’s about paying off your current mortgage and replacing it with a new one that better suits your needs. There are a variety of reasons to consider a mortgage refinance:

• You want to take advantage of the increase in the value of your property.
• You want to use the equity in your home to fund improvements or renovations.
• You are looking to consolidate your debts.
• You have children who are starting at university.
• You are going through a divorce.
• You might get a better interest rate.
• You want to switch from a fixed rate mortgage to a variable rate mortgage (or vice versa).

If done properly, mortgage refinancing can bring significant benefits to your finances. It can help reduce financial pressures and get you back on track for your financial future. But that’s not all :

1. Get a better interest rate: One reason to refinance your mortgage is to get a better rate. A low rate is not an end in itself (you also want to take into account, for example, mortgage conditions and penalties), but there is no harm in looking for one! As the mortgage professional at your service, I have access to dozens of lenders, and I can explore the market to find you a better mortgage product for your needs.

2. Consolidate your debts: There are different types of debt, from credit cards and lines of credit to student loans and mortgages. However, most consumer debt carries interest rates that are much higher than what you pay on a mortgage. By refinancing, you can free up the cash to pay off those debts. You will have increased your mortgage, but your payments could be much lower than the sum of your previous payments, and you will only have to make one payment instead of several. Remember, however, that the equity in your home must be at least 20%.

3. Modify your mortgage: Life is always changing, and sometimes you want to pay off your mortgage faster, or change your mortgage type. Maybe you received an unexpected amount of money and want to use it for your mortgage. Or maybe you’re wary of the market and want to secure a fixed rate. It’s always best to think about it when your mortgage matures, but if you can’t wait, consult a mortgage broker to find out what the penalties would be.

4. Take advantage of the equity in your home: One of the big reasons to buy a home is to build up equity in your home. Equity is the difference between the market value of your property and the balance of your mortgage. If you need funds, you can refinance your mortgage up to 80% of the appraised value of your home.

Refinancing can give you access to 80% of your home’s value, but there’s a price. If you choose to refinance before the next due date of your loan, you must terminate your mortgage agreement and it can cost you dearly. It is therefore always better to wait until the end of your mortgage term before refinancing, but think about it a few months in advance to have time to weigh your options before having to renew.

You should also be aware that refinancing can prevent you from having access to loan insurance, which can limit your choice of lenders. Finally, you will have to go through the eligibility test again according to the rates and the rules in force (including the “stress test”) in order to demonstrate that you can afford the refinanced mortgage.

If you’re stuck or wondering if a mortgage refinance would work for you, don’t hesitate to contact a Mortgage Architects broker today! Together we will review your current mortgage, your financial goals and your plans for the future to help you determine what is the best solution for YOUR needs.