Is Refinancing Your Mortgage Right for You?

Refinancing a mortgage refers to paying off an existing mortgage and replacing it with a new one. Homeowners choose this strategy for a range of reasons, the most common being:

• lowering one’s monthly payment to improve cash flow or free up money for a rainy day savings fund,
• consolidating high-cost consumer debt, such as credit cards, car loans or other personal loans,
• renovating one’s residence while taking advantage of possible federal home renovation tax credits,
• setting up a home equity line of credit or “HELOC.” This approach allows you to withdraw funds as needed, when needed. A HELOC can be established for a one-time cost and accessed many times without the need to re-qualify, provided payments are kept up-to-date.

Accessing Your Home Equity

If you’ve been paying your mortgage for a few years, you’ve most likely built up equity in your property. What many of us don’t realize is that the home equity that your hard work has built over the years can now be a tool that can help you achieve your personal financial goals. Is this strategy right for you? A first step is to have a look at Mortgage Refinance Calculator.

Prepayment Penalties

A key element in evaluating any refinancing option is calculating the prepayment penalty that may be imposed by your current lender. Most mortgages contain a clause that obliges the borrower to pay a penalty if they pay off their mortgage in full before the maturity date. This penalty is usually based on the remaining term on the mortgage, as well as a calculation of the differential between the rate being paid and that lender’s current mortgage rate offerings.

Refinancing is a strategic financial decision that requires the assistance of a mortgage expert to get you the best deal from the many options available. To get started on thinking about your options, click here for our Canadian mortgage refinance calculator. A mortgage broker has access to a full range of mortgage lenders, the latest information on Canadian mortgage rate trends, and can guide you to the mortgage solution that suits your individual needs.

Blend and Extend Options

At a time when rates are low, but look like they may be heading upwards, you may decide to extend your mortgage at a lower rate for a longer term. In this situation your current lender will usually allow you to break the mortgage with a penalty, give you a new long term mortgage and blend the penalty into the new rate. This is commonly called a “blend and extend.”

Looking for a mortgage quote on a blend and extend arrangement? A mortgage broker can work with you to assess if this option fits your requirements.