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When To Refinance Your Mortgage

Ajay Jain

17 Oct 2019 Mortgage Refinancing

When to refinance your mortgage

Understanding Mortgage Refinancing

Mortgage refinancing is when a homeowner takes out a new loan to pay off their original mortgage(s), typically in order to reduce their interest rate. Generally, the loan used for refinancing has its own terms, unique from the original mortgage and can be from a separate lender.

When to Refinance Your Mortgage?

There are many reasons why refinancing a mortgage would be beneficial to a homeowner. When making substantial financial decisions it’s important to evaluate the reasons why you’re taking out a new loan. Here are some of the most common refinancing motives in Canada.

1. Refinancing to access home equity

By refinancing your mortgage, Canadian homeowners have the option of borrowing up to 80% of their home’s value, minus any amount outstanding from previous mortgages. Borrowers are then free to utilize the financing as they please. Most commonly for investments, renovations, education, or paying off debt.

2. Refinancing to lower your mortgage rate

As mortgage rates change so can your financing options. One of the best uses of mortgage refinancing is to lower your previous mortgage rate, saving you money in the long run. Be sure to make yourself familiar with any penalties you may incur in breaking your current mortgage contract, but generally a savings of 0.5% or more should provide you long-term savings.

3. Refinancing to consolidate debt

Homeowners who are carrying debt from various loans have the option of consolidating all their debts into one loan through mortgage refinancing. By leveraging the equity in your home, you can obtain a lower interest rate and help to pay off higher interest rate debts such as credit cards, auto loans, or personal lines of credit.

4. Refinancing to convert to a variable or fixed rate mortgage

Depending on adjustments to the market’s interest rates, converting to or from a variable or fixed term mortgage could provide financial benefit to the borrower. This strategy would also be reliant on the amount of time homeowners plan on remaining in their house. In short-term situations, homeowners can take advantage of converting to a variable mortgage rate without having to worry about future increases.  Variable rate mortgages also offer favorable break fees if you want to sell your home. 

5. Refinancing to shorten loan terms

Again, leveraging falling interest rates, homeowners can refinance their loan in order to obtain one with significantly shorter term without much change in their monthly payments.

How Can Rateco Help Refinance Your Mortgage?

One of the challenges with mortgages in today’s market is gaining approval. Since the new mortgage “stress test” was introduced in 2018, Canadians have faced greater challenges in obtaining mortgages and refinancing from major Canadian banks.

That's where Rateco comes in. As a digital brokerage we have a greater ability to get you approved for your mortgage by sending your file to several lenders with a single click. At Rateco we will always fight to get you the best deal. We have access to a number of Bay Street lenders as well as private lenders, and everyone in between! 

We believe that the borrower should have control over who they chose to work with.   By creating deal tension with the lenders, we are able to offer you the most competitive interest rates!

Refinance your mortgage today!