Refinancing your home

Why Refinance?

Lower Interest Rates: If interest rates have significantly decreased since you took out your current mortgage, it might be worth paying the penalty to break your term and secure a lower rate. This can reduce your monthly payments and save you money over the life of your mortgage.

Debt Consolidation: Combining high-interest debts into one manageable payment at a lower interest rate.

Accessing Equity: Taking out equity from your home can provide funds for various needs. Here are a few reasons you might consider pulling equity out of your home:

• Home Improvements: Investing in renovations or upgrades can increase your home's value and improve your quality of life.

• Education Expenses: Financing higher education for yourself or your children.

• Investments: Using equity to invest in other properties or financial markets.

• Major Purchases: Funding significant purchases such as a new vehicle or vacation property.

• Emergency Funds: Creating a financial cushion for unexpected expenses or emergencies.

• Starting a Business: Providing capital to start or expand a business.

Refinancing Limits

In Canada, you can refinance your home for up to 80% of its appraised value. This ensures that a portion of your home’s equity remains intact, providing a buffer for both you and the lender.

Fees Involved

Here are some fees involved if you are considering a refinance.

1. Legal Fees: To handle the necessary paperwork and legalities, budget for $1500-$2000

2. Appraisal Fees: To determine the current market value of your home, budget for $500-$600

3. Penalty Fees: If you break your current mortgage term, you may incur a penalty. This penalty can often be rolled into your new mortgage.

Interest Rates on Refinances

Be aware that interest rates for refinancing can sometimes be slightly higher than the rates available for new home purchases. This can be due to various factors, including the lender's policies and current market conditions.

Alternative Options: Second Mortgages

If your current mortgage rate is lower than the current rates you may want to explore the possibility of taking out a second mortgage rather than redoing your current mortgage. Depending on your current lender, this may be a viable option to access your home equity without breaking your current term. This allows you to benefit from the existing lower rate while still accessing necessary funds.

Conclusion

Refinancing can provide financial flexibility and savings, but it involves costs and considerations. Understanding the fees and potential penalties, along with exploring alternatives like second mortgages, is crucial. Reach out to one of our brokers to determine if a refinance makes the most sense for your financial situation.