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Mortgage Refinance

        When considering a refinance of your current mortgage, most times you will face a  number of costs like a penalty to break your current mortgage and legal fees to  discharge and place the new mortgage on the property.  If this is the case, it is best to  find out what those costs will be and if your new mortgage rate will save you enough  money over the term to make the refinance worth it.  If  those costs are too great a second mortgage may be the way to go until your current mortgage comes up for renewal when you can put both loans together.  A good Mortgage Broker will work through all the details of the best move for you and tell you if it makes sense while leaving the final decision to you.

A refinance may be with your current lender or a new lender that you choose and should not be confused with a mortgage switch.  A mortgage switch is when you move your existing mortgage to a new lender and do not increase the principal amount..  The new lender most times will pay for all costs associated with that financial move.  For better rates, service and terms, paying that prepayment  penalty will make sense in the long run of your mortgage.

Basics of mortgage refinance

When considering a mortgage refinance for debt consolidation you may be  looking at paying your mortgage off sooner than if you continued with your current  financial situation.  Carrying balances on high interest credit cards, personal loans or  lines of credit  while paying your mortgage may mean you are paying too much interest.  If consolidated at a lower rate you will save money and also be able to take advantage of any pre-payment arrangements your mortgage lender offers saving even more money.  The following are some of  the main reasons Canadians refinance their homes

• Debt consolidation
• Investing 
• Purchase a vacation property
• Education

Applying to refinance your home with the help of a mortgage broker is usually very straight forward.  An appraisal will be carried out and you will be asked to provide your current income information along with what debts or how much equity you would like to take out of your home.  The whole process can take as little as a week with an average of two weeks from start to finish.  

Refinance for investing

When you refinance to buy investments you will follow the same process of qualifying for a mortgage but the interest that you pay on the proceeds that have been invested now become tax deductible.  This is called the Smith Maneuver and should be set up by a professional as there are income tax implications and other tax deducible mortgage products on the market that may better suit you need.

Things to remember

When you are going to refinance or move your mortgage from your current lender, ensure your credit lines are all current and not over limit.  To get the best rate you need a good credit rating and  being late or over limit will hurt your ability to get the best mortgage.  Plan to look at your situation about 4 months before you renew or refinance, this way you will be prepared for any problems that might arise.

Over the last year mortgage prepayment penalties have been more toward the IRD (Interest Rate Differential) and not three months interest.  These are two very different ways to calculate a penalty.  An IRD takes into account what the lender will be losing in interest income for the remaining term of your current mortgage while three months interest is just that, three months interest being paid.  

Having a mortgage broker arrange your mortgage increases your financial options.  Most times you do not pay for this service; you save time and money.