There comes a time when, for certain reasons, you may have to refinance your mortgage in Ottawa. This simply means paying up your current loan before the term expires to change specific details of your loan. Or it could be to get a lower rate or change to a different lender in Ottawa. Whatever reason you may have for refinancing your mortgage, you must know that it comes with certain risks. Especially in the capital city, Ottawa, where there are many firms offering mortgage refinancing services, there are risks and penalty costs.
Therefore, before you fully decide to take the path of mortgage refinancing, you should read this guide on mortgage refinancing in Ottawa, Canada. We will discuss what a mortgage refinance is, its purpose, its major reasons, and its costs, risk, and rates. Thus, you do not want to skip this.
What is a Mortgage Refinance?
In simple terms, mortgage refinance refers to acquiring a new loan on your house by ending your current loan before the expiration of its term. It works in a way where you pay off your current loan and replaces it with a new one. The new mortgage might have different details from the old one, such as term length, lower interest rates, higher mortgage balance, and much more. You could also pay off your current mortgage and get a new loan with a different lender for extra benefits. This is especially so in Ottawa, where some mortgage firms offer rewards and gifts.
What is the Purpose of Mortgage Refinancing?
Moving on, there are several purposes for mortgage refinancing. Some purposes are central to the essence of refinancing a loan. Refinancing mortgages occur because homeowners seek to make a change. This change could be in terms of the loan term, rates, and many others. But for these changes to occur, the current loan needs to be paid off and refinanced with a new one.
Therefore, some major reasons for refinancing mortgages in Ottawa include;
Borrow More Money
One main aim of mortgage refinancing in Ottawa is to borrow more money by accessing the equity on one’s property. Assuming the balance of your current loan isn’t much and you need money for other investment opportunities or your children’s education. You can refinance your mortgages, which gives you access to up to 80% of the appraised value of your property. This means that you get more money from refinancing in Ottawa.
To Change Interest Rate
Mortgage refinancing is also aimed at reducing interest rates. This is because this type of loan has a lower rate than other types of loans. So, when homeowners notice that interest rates have dropped in Ottawa, they often opt for the option of refinancing their loans to get a lower interest rate.
To Change Term Length
Mortgage refinancing is also used to change loan terms. The new loan often has different details from the previous one. And one such detail that has changed is the term length of the loan, giving homeowners in Ottawa, Canada, a longer period to pay off their mortgage.
To Change Lender
Homeowners also choose to refinance their mortgages to change lenders. Perhaps there is a lender in the capital city who offers certain benefits that you desire. You can change lenders through mortgage refinancing.
But note that there are penalties or prepayment fees attached to ending your current mortgage before the term ends, which are legally binding.
What are the Reasons for Mortgage Refinancing?
There are many reasons for refinancing a mortgage, some of which are part of the purposes of mortgage refinancing. A big city like Ottawa comprises diverse individuals, each acquiring mortgages for different reasons and equally acquiring mortgage refinancing for various reasons. Some of these include;
· It could be to borrow more money to offset a financial burden such as school fees, pay off debts, or engage in new investment opportunities in the capital city.
· To get lower interest rates that reduce your mortgage costs in the long term. There might be rumors about a potential hike in rates. So, you might want to take advantage of the current low-interest rates by paying off your current loan and getting a new one at a lower rate before the hike.
· It could be to change the mortgage type. Mortgage refinancing allows you to change your type of loan from a variable rate to a fixed rate, or from a higher monthly payment plan to a lower monthly payment plan, and so on.
· If you plan to renovate your house or want to purchase a new property. Then mortgage refinancing could provide the needed funds for these and other expenses that may arise.
· You might want to consolidate your debts by acquiring a mortgage refinance that helps you pay off all your pending debts. Then, you can plan effectively to have a better, more stable financial state and credit score.
· You may want to revisit the prepayment penalty on your loan and, thus, get a mortgage refinancing to change this detail.
How to Refinance Your Mortgage?
In the capital city of Canada, there are several ways that you can refinance your mortgage.
Break Your Current Loan
You can break your current loan to refinance your mortgage. This is done by paying off your existing mortgage. Then, acquire a new loan with any lender of your choice at a lower interest rate. But ending your loan before the expiration of the term attracts prepayment penalties.
Blend or Extend Your Current Loan
You can also extend your current loan with your current lender at a blended rate. But only if your current lender allows blending loans, which simply means combining your existing loan with a new one. It allows you to blend your current rate with a new market rate. But in comparison to other options, this is often more expensive.
Get a Home Equity Line of Credit
Individuals can also access mortgage refinancing by adding a home equity line of credit, which means they get access to their home’s equity at their discretion. This is possible in Ottawa.
Rates for Mortgage Refinancing
The rate at which firms refinance mortgages varies based on their offer. Some firms offer fixed rates for refinancing over a fixed period, while others offer lower variable rates. So, you should do proper research on the rates of mortgage services to refinance before you jump into it. Or you check out the rate of your current lender to refinance.
Best Mortgage Online allows you to compare rates of various firms across Ottawa. It also places the shopper’s interest at the centre of its activities, by ensuring that homeowners get the get best deal based on their terms, saving cost and time.
Best Mortgage Online offers various rates from banks, brokers, and even private lenders. You can get a;
· 2.64% broker rate on a 5-year fixed loan.
· 2.94% banks best rate on a 5-year fixed loan.
· 8.49% lenders rate on a 1-year renewable loan.
These rates are some of the best available in the capital city.
Conclusion
In summary, mortgage refinancing has lots of benefits for homeowners, especially in the capital city, Ottawa, where there are more opportunities in terms of mortgage services. But know that it comes with risks. The prepayment penalty for variable mortgage rates in Ottawa is often three months of interest, while that for fixed loan rates is over three months of interest.
So, you need to evaluate your ability to cover this cost of refinancing before you choose it. Also, know your reasons as the main aim is to have a better financial life overall. So, you do not want to refinance your mortgage for a cause that will only depreciate and leave you in debt.
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