Refinancing Information:
There are many reasons why you might want to refinance, or increase, your
existing mortgage — to consolidate non-mortgage debt, to finance improvements
to your home, etc. Let us help you negotiate with your existing lender or
switch to a new lender who will give you a more favourable rate. There are
many factors to consider when refinancing your mortgage.
Here's what you need to know:
Consolidate other debt
Most unsecured debt is priced by your bank at a higher rate than your mortgage
in order to compensate them for the higher risk of loss if you default.
For many people it only makes sense to use available home equity to pay
out this debt, as it typically reduces interest costs significantly. If
the total of the existing mortgage and the debt to be refinanced is less
than 75% of the value of your home, and you qualify in terms of income and
credit standing, refinancing your first mortgage should be a breeze.
Renovations & home improvements
If you want to spend a significant amount of money on improving your home,
you may be able to take out a lot more equity than you realized! Peter can
advise you through this process. Both insurers — Genworth and CMHC,
will insure new mortgages which are "topped up" for this purpose,
and the total of your current mortgage and the new funds exceeds 75% of
the current home value. Not all improvements are eligible, however. Pools
and spas are typical "over-improvements" which may not qualify
for a high-ratio equity take-out. Of course, if the total requirement is
less than 75% of your home's current value, you should have little trouble
getting the "top up" you need — regardless of the degree
of luxury you plan to add.
Combining existing mortgages
Where the combined mortgages result in
one "high ratio" mortgage:
If neither (or none) of the mortgages you're combining was ever insured,
but combining them results in a high-ratio situation, you'll be required
to pay an insurance premium. You need to look closely at the total savings
the combination will give you, in order to determine whether this is financially
worthwhile.
Where the combined mortgages result in
a new "conventional" mortgage:
High ratio insurance is not required. As long as you qualify with your income
and credit standing, We will help you achieve this quickly and conveniently.
In both cases there is one critical consideration which causes the failure of many such refinances. The new mortgage often requires a fraction of the cash flow previously needed to service the now consolidated debt. Many who go through this process not only absorb the cash flow savings into an improved lifestyle — they either re-incur debt that they paid out, or incur debt for which they now qualify — or both. It is important to approach such a consolidation/re-combination of obligations with the clear and focused goal of applying all savings toward paying down the mortgage. Otherwise, the new mortgage will be a burden, rather than a solution.
Breaking a closed mortgage to transfer
to a new lender
Many closed mortgages have the feature that allows the balance to be paid
out with a penalty after a certain time has elapsed on the mortgage. Check
the "prepayment" clause in your mortgage to determine your own
situation, or better still, call your institution and ask them the cost
of paying out in full.