Why would I need to refinance my mortgage?
Refinancing your mortgage can be very advantageous if you are looking to reduce your monthly mortgage payment. Or your overall debt payment by consolidating higher interest debts with current mortgage interest rates.
Many homeowners have refinanced to make improvements on their home, start investments, send their children to university, or because of a consumer proposal among other things.
There are many things to consider when you are thinking of refinancing your home loan; and getting the right mortgage advice can save you thousands of dollars. For example consolidating $40,000 credit card debt could save you about over $1000 in payments a month.
If you are thinking of refinancing, you will need to ask questions like:
- Should I get a 30-year amortized mortgage and reduce my monthly mortgage payment?
- Should I reduce my Amortization and pay down my mortgage faster?
- Are there advantages to combining a first and second mortgage?
- Would getting a second mortgage to pay my consumer proposal help my credit?
- How much will I save if I refinance my mortgage early?
Each mortgage borrower situation is different so deciding on things like whether you should take a fixed rate mortgage or a variable rate mortgage will depend on your risk aversion to mortgage interest rate fluctuations, your budget and stability of income among other things.
With a fixed rate mortgage, mortgage payments are fixed for a specific term with no chance of increasing during the term. With a variable rate mortgage or adjustable rate mortgage, rates and payment fluctuate with the mortgage lender’s prime rate.
Refinance mortgage rates are also higher than getting a new mortgage with less than 20% down payment. This because mortgage with less than 20% down have to be insured by either CMHC, Canada Guaranty Mortgage Insurance or Genworth Canada. Mortgage with more than 20% equity (which a refinance mortgage has to be) are not usually insure so they are considered a higher risk by lenders.
Due to prior credit issues some homeowner’s existing mortgage rate might be higher than current mortgage lending rates and now might be the best time for them to lock into a current 5 year mortgage rate for extra security or try to combine a first and 2nd mortgage to lower their payments.
Others refinance because their current mortgage lender will not refinance their mortgage and thus have to seek an alternative mortgage lender for their home loan. If an alternative mortgage lender will not accept the borrower they may have to get private mortgage financing.
It is always a good idea to get a second mortgage if you have a great rate with your current mortgage lender and you have debts that you want to pay out and reduce your monthly payments and then refinance the mortgage at the end of the mortgage term and reduce your interest rate.
The best place to start is by visiting our online mortgage calculators. If you need help please send a message to us and one of our online mortgage brokers will contact you to devise a plan that best fit your unique situation.