The following constitutes general mortgage advice in Windsor and Essex County Ontario. For detailed and situational information, always refer to a mortgage expert.
Refinancing a mortgage is where you end your existing mortgage contract and pay the current balance in full by securing another mortgage loan. You can potentially borrow up to 80% of the appraised value of your home. The new loan comes with its own terms and conditions, including a different interest rate than you had with the prior mortgage loan. This method of borrowing is preferable to other types of debt because mortgage interest rates are generally lower than other loans you may apply for, either from a bank or private lender.
Refinancing your mortgage is a serious and long-term commitment. Before you approach a lender, you must first determine whether you have a good enough reason to apply for a loan. The following examples are considered valid reasons to apply for mortgage refinancing:
⦁ You are planning to renovate your house.
⦁ You are thinking about buying a new property.
⦁ You need to put up enough money for your child’s education fund.
⦁ You are thinking about entering into a new business venture, but do not have the capital to proceed.
⦁ Refinancing your home is a strategy to consolidate all your debts.
If you refinance on a closed mortgage before your term is up, you’ll be charged a prepayment penalty. Additionally, if your credit score is low, you will be perceived as a risk, and chances will be extremely low that your application will be considered.
The Financial Consumer Agency of Canada states on its website that lenders who agree to refinance mortgages may offer borrowers these options:
⦁ A second mortgage – can be secured with your home equity. The new mortgage must be paid off as well as the original one, and if these payments are not made, your home will be sold to cover the losses.
⦁ A home equity line of credit (HELOC) – is much like your typical line of credit but is secured by your property. You can withdraw funds up to the established credit limit, and after you’ve paid the amount back, you can borrow from this line of credit again.
⦁ Other types of loan or line of credit that can be secured with your home – If you’ve made prepayments on your mortgage, then it’s possible for you to re-borrow a portion of that from your lender.
According to Shelley Russell of Fuse Mortgage, “Refinancing is an excellent tool to leverage your home equity and make it work for you. It is the greatest asset for most Canadians and refinancing is an excellent option available to all homeowners.”
When you refinance the mortgage of your property, you’re not just going to pay back the amount you borrowed. You have to consider other expenses such as:
⦁ Home appraisal costs
⦁ Title search fees
⦁ Title insurance fees
⦁ Legal costs
Once you have calculated the total costs that come with refinancing your home, you’ll get a clearer picture of whether the loan options available to you are favorable or not!
For detailed information regarding your situation, please message me and I will connect you with mortgage experts I work with, to serve you better.