Home Refinancing FAQs
Mortgage refinancing may offer lower interest rates but entering into this type of agreement is ONLY beneficial or advantageous to the borrower under certain circumstances. Therefore, you must do some research about the current value of your property as well as what the market rates in your region are.
If the present situation is close to ideal and the projected state of the market in the foreseeable future is relatively stable, then it’s the right time to apply for a loan.
However, coming to a decision can be tough, so please reach out to a Mortgage Broker with GLM Mortgage Group | Dominion Lending Centres to discuss.
There are many reasons why it could be a could idea to apply for mortgage refinancing, but below is a list of very common reasons:
- You are planning to renovate your house
- You are thinking about buying a rental or vacation property
- You want to pay for your child’s education fund
- You are thinking about entering a new business venture, but do not have the capital to proceed.
- Refinancing your home is a strategy to consolidate all your debts
- Interest rates have dropped to the point that refinancing your home can lower your borrowing costs.
When you refinance the mortgage of your house, the amount you borrow will depend on the equity of your home. You can only receive a loan that amounts to a maximum of 80% of the appraised value of your home. Knowing this information, you can calculate the amount of a loan you could receive and the payments each month.
We think that it is best to ask yourself what you are refinancing for and if the budget is comfortable enough for something of that size. If the answer is no, then perhaps it’s not the right time to refinance.
Every lender has their own standards but three areas that will be looked at the most are your credit score, your debt-to-income ratio, and your home equity.
Yes, you can get a rate lock for a refinancing mortgage.
Yes, there is a penalty to break the existing mortgage and refinance into a new mortgage. The penalty will be either 3 Months Interest Cost (if you have a variable rate) or an Interest Rate Differential (if you have a fixed rate). It’s always best to reach out to your current lender to confirm this penalty and factor that into the refinance calculations to assess it’s worthiness.
Refinancing does come with some expenses, seen below for consideration.
- Home appraisal costs
- Title search fees
- Title insurance fees
- Legal costs.
- Penalty to break existing mortgage
Second Mortgage: A second loan you can secure with your home equity. You must pay off the new mortgage as well as the original one, and if you default on your payments, your home may be sold off to cover your debt on both loans.
Home Equity Line of Credit (HELOC): Operates 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.
Reverse Mortgage: Another option for homeowners who are at least 55 years of age and would like to convert their home equity into cash.
Fixed-rate mortgage: You will pay the same monthly payments and interest rate for the duration of the mortgage term.
Variable-rate mortgage: Your monthly payments and the interest rate of your mortgage will fluctuate depending on market conditions.
Hybrid or combined rate mortgage: Terms may include fixed and adjustable rates.
