Mortgage Refinancing

Canadian mortgage holders face many reasons to refinance their mortgage. Some have improved their credit score and are seeking refinancing because they now qualify for a better rate. Others wish to stabilize their payments by switching from a variable rate mortgage to a fixed rate mortgage. Mortgage refinancing can be a lower cost way to borrow money than taking out a traditional loan: a good option to consolidate debt, make home improvements, invest, buy an additional property, invest in stocks, send the kids to university, etc.

Unlike a mortgage renewal, a mortgage refinance involves changes to the existing balance, and can happen at any time during the term, not just at term expiry.

There are many reasons a consumer may want to break their term with their existing lender and seek a mortgage refinance. In times of falling interest rates, the obvious reason is to reap the financial benefit of a lower rate. It’s a pretty straightforward math equation that your licensed mortgage advisor would be happy to present to you: calculate the penalty to break your current term, and then compare that penalty to the savings gained over the balance of your existing term with a lower rate. If those savings are higher than the penalty, it makes a lot of sense to proceed. The penalty can even be rolled into the mortgage, to reduce your out-of-pocket expense. Even when the penalty is higher than the mortgage savings, the mortgage refinance might still make sense if higher interest debts are also being consolidated. Everyone’s situation is different, it’s always best to consult a licensed mortgage broker and get some personalized advice.

While removing equity from your home can be a good idea, you should do so with caution and fully understand the benefits and possible risks. The best thing you can do is to consult a licensed mortgage broker and certified financial planner to discuss opportunities to make your home’s equity work for you.


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