Mortgage Refinancing

What You Should Know About Mortgage Refinancing, Rates, and Terms

As the Bank of Canada continues to increase interest rates in efforts to curb inflation, it may be time to consider refinancing your mortgage. It could also be the ideal time to refinance if you’d benefit from taking out a larger loan to consolidate your consumer debts or to finance a major project or purchase.

But before you make your decision, here is what you need to know about mortgage refinancing in Brampton.

What is mortgage refinancing?

To refinance your mortgage means you are breaking your existing mortgage and replacing it with another. The new mortgage could be for the same amount as your current mortgage and simply pay it off, or it could be for a larger amount if you wish to borrow from your home equity in addition to paying off your current mortgage.

When should you consider a mortgage refinance in Brampton?

Generally speaking, it makes sense to refinance your mortgage if you can lower your interest rate by half a percentage point or more and you are planning to continue living in your home for at least a few more years.

Here are a few common reasons for getting a mortgage to refinance:

  • To reduce the amount of your monthly mortgage payment.
  • To change the terms of your mortgage – such as replacing a 30-year amortization period with a 15 year so that you can pay off your mortgage faster.
  • To get a longer amortization period in order to make your mortgage payments more manageable.
  • To change from a fixed rate mortgage to a variable rate mortgage – or vice versa.
  • To get a low-interest loan secured by your home equity.
  • You expect interest rates to rise and you want to lock in a rate before they do.

Are there any drawbacks to mortgage refinancing?

The main drawback that you will need to consider if you are thinking about refinancing in Brampton is that because you will be breaking your current mortgage, there will be a financial penalty for doing so. The further away your mortgage renewal date is, the higher this penalty will be.

When a mortgage broker recommends a mortgage refinance, they should always run the necessary calculations to ensure that the amount of money their client will be saving in interest will offset the amount of financial penalty that they will have to pay.

How to refinance your mortgage in Brampton

  • See your mortgage broker While it’s possible to refinance directly with a lender, it is in your best interest to work with a broker. A broker can help you find the best possible rate on your mortgage refinance, and they can also advise you if a refinance is really the best option for you. (As opposed to a second mortgage or other product).
  • Get a home appraisal (maybe) If you intend on using your mortgage refinance to borrow from your home equity, the lender may require that you get a home appraisal. Your broker can help you with this.
  • Gather your financial information Just like when you got your first mortgage, the lender on your refinance will require certain financial information and documents from you. Your broker will provide you with a checklist of what you need.
  • Complete the application Another advantage of working with a mortgage broker is that they will help you complete the application properly. Improperly filled-out applications can lead to delays or even denials.
  • Receive approval and commence your repayments Once you receive approval on your mortgage refinance in Brampton, you can start making payments on your new mortgage.

Contact me today

Are you interested in learning more about mortgage refinancing in Brampton? If so, contact me today.

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