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Everything You Should Know About Mortgage Refinancing in British Columbia, Canada

Mortgage Refinance BC

Mortgage Refinancing is a smart financial move that allows you to pay off your existing mortgage loan in exchange for a new mortgage, either with the same mortgagee or a different mortgage institution. The concept of “mortgage refinancing” may seem slightly difficult to comprehend at first, but it is essential to acquire adequate knowledge about the concept before delving into it.

In this article, we will provide you with everything you need to know about mortgage refinancing in British Columbia and the process involved if you are considering it.

Ready to learn? Dive in.

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Mortgage Refinancing Explained

Mortgage financing is the act of taking out a larger mortgage to pay off your existing mortgage. Doing this enables you to access up to 80% of your home’s equity in funds, and you can use this money to cater to other financial obligations.Mortgage refinancing is an option for many mortgagors getting close to their amortization date or needing money to cater to some expenses.

Why Do People Get Mortgage Refinancing?

There are several reasons people get mortgage refinancing, but we will examine some common reasons among people in British Columbia, Canada.

1. Affordable Interest Rate

People often go for mortgage refinancing as these loans have lower interest rates than existing mortgage loans. This will help reduce the amount you have to pay every month.

2. Access to Home’s Equity

Mortgage refinancing gives you access to your home’s equity. You can take up to 80% of your home equity in mortgage refinancing, and this is one of the key areas mortgage refinancing differs from a normal mortgage. The benefit of this is that you can get the monetary value of your house for temporary use and gradually pay it back.

3. Amortization Period is Close

Another reason people get mortgage refinancing is if their amortization period is close. This is one of the most common reasons. When the deadline to finish payment on your mortgage is getting too close, and you realize that you may not be able to complete the payment in due time, you may consider mortgage refinancing. This will help you keep your credit score within a reasonable limit and calmly pay the new loan over a fixed or varying period.

4. To Consolidate Debt

People often go for mortgage refinancing to consolidate their debts. If you have several debts across different places, you can use your home to get a mortgage refinancing and use the money to settle those debts. Then, you can focus on paying back the new mortgage as your only debt. Although you have to be careful when doing this as many people have fallen into greater debt due to a lack of discipline in repaying their mortgages.

5. Access to Funds for Other Projects

If you have an emergency or long-term project to pay for and have no means of getting financial support, you can consider getting your mortgage refinanced. Many people do this by leveraging their home’s equity and using the remaining money after paying the current mortgage to secure some financial backup. This method has proven better in some instances than getting short-term loans.

Benefits of Mortgage Refinancing

More people are considering mortgage refinancing these days, and there are several reasons for this trend. Mortgage refinancing offers many opportunities for borrowers that many people find appealing. We will explain some of them better:

1. Reduced Interest Rates

Good mortgage refinancing always comes with a reduced interest rate compared to the old mortgage. It offers a way out for those who struggle to pay the high interest on their mortgages. It may take a long while to finish paying up, but the monthly or yearly payment will reduce enough to ease the burden on the borrower.

2. Helps to Consolidate and Reduce Debt

With credit card debts, short-term loans and several other financial burdens hovering over many Canadians in British Columbia, many take out mortgage refinancing to improve their situation. The loan is used to offset others, and borrowers can focus on the single debt before them.

3. Gives You More Autonomy Over Your Mortgage

Mortgage refinancing allows you to change details of your current mortgage that you do not like. You can go for one that suits your desire regarding interest rate, amortization date, and others.

What are the Disadvantages of Mortgage Refinancing?

As with every other good thing out there, mortgage refinancing has its downsides. We have examined some of them below:

1. Severe Penalties When Defaulted

Mortgage refinancing comes with many perks, but the consequences can be dire if you default on the repayment. It may affect your credit score badly and prevent you from getting other loans later on.

2. High Tendency to Acquire More Debts

Getting mortgage refinancing requires great discipline. First, you need to manage your finances properly to ensure that you do not end up in more debts from the interests accruing on your mortgage. The figures on mortgage arrears keep increasing yearly, which does not bode well for borrowers.

What is the Process Involved in Refinancing Mortgage?

Contrary to what you may have believed, getting mortgage refinancing is no rocket science. The process is straightforward once you have the right guidance.

1. Apply for a New Loan

The first thing to do is shop around for a better mortgage for your home. Compare rates and requirements before making your decision. Once you do that, contact the bank or finance company, and fill out the necessary forms. You will have to meet their eligibility criteria which include being up to 18 years old, being a citizen of Canada and possessing a government-issued ID. Once you fulfill all those, fill out the forms and wait for your request to be processed.

2. End Your Current Mortgage

Once you have your new mortgage ready, you have to cancel the old one. That usually requires you to pay a cancellation fee, among other penalties. Ensure that your new mortgage is enough to cover all the costs you will incur. The moment you are released from your old contract, you only have to focus on repaying the new mortgage and putting the remaining money to good use.

3. Get a Professional to Walk You Through

This step is not emphasized enough. To get the best deal out of mortgage refinancing, you should get a professional to walk you through the process. You can speak to your lender, get a lawyer, or contact other mortgage and insurance experts such as the professionals at  Insurance Direct Canada.

Conclusion

Mortgage refinancing is fascinating for people looking to improve their financial situation and have their homes as their biggest asset. If you are one of these people, you must have learnt the fundamentals of mortgage refinancing and know how to make the right decision. Remember to consider the costs you will incur and how the mortgage will affect your credit score. If you do not know much about mortgages and all they entail, you can reach out to experts like Insurance Direct Canada for guidance.

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Mortgage Refinance

A Guide to Mortgage refinancing in Ottawa, Canada

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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.

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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

Mortgage Refinancing

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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Mortgage Refinance

When Is the Right Time to Refinance Your Mortgage in Canada

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If you look at the latest state statistics, you can see that home-ownership has been rising in recent years. At the moment, nearly 3/4 of families in the country have a fixed mortgage rate.

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With prices of homes soring, many people have to build up equity in their homes. However, they still may feel they’re cash-squeezed. If that is the case for you, refinancing your mortgage may be an excellent strategy to lower the total monthly payments.

But is it the right time for you to refinance your mortgage? That’s what we’re going to try and answer.

The Basics of Mortgage Refinancing in Canada

If you’re like most Canadians, your existing mortgage is on a closed, five-year term and of a variable rate. That means that the interest on your loan is not fixed for the duration of the borrowing period. Instead, it’s subject to changes in market trends, and at times, this could result in higher monthly payments.

At the same time, if you have a five-year closed mortgage at 3%, today, it might be worth refinancing into a new loan that is also for five years but has an interest rate of just 2%. That’s because your existing equity in your home could qualify you for a lower interest rate on your next mortgage.

By refinancing your current mortgage, you could lower your monthly payment by as much as 20% or even 25%. You can also take advantage of an offer to agree to a fixed interest rate for the next five years.

Many Canadians are refinancing their mortgages simply because they feel this is the best time. As a result, interest rates are rising, but not enough to offset all of your savings.

If you’re thinking about refinancing your mortgage, perhaps these tips might help you decide when is the right time for you to refinance.

When To Refinance Mortgage When Interest is Rising

One of the best times to refinance your current mortgage is when interest rates rise. You might even be able to secure a better interest rate on your new mortgage as well as lower monthly payments if you have equity in your home.

In many cases, those who completed a refinance at the right time didn’t take no for an answer from lenders during their initial attempt.

Another thing to keep in mind is that it will take at least three weeks to approve the new loan. Then you’ll need to get your documents in order, including a copy of your existing mortgage, title search and other financial information needed by your lender to process your application.

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When To Refinance Mortgage When Interest is Going Down

People who refinance their existing mortgage when the interest rate is going down may not see as many savings as they would if rates were rising, but they could still save $100s or $1,000s over the life of your loan. You can then use that money for other financial goals that will reap future rewards, like perhaps using it to pay off credit card debt.

The other thing to consider is that you don’t have to wait until interest rates are higher before refinancing your loan because if you do, you could end up paying more interest over the term of your new mortgage. So, for example, even if interest rates fall by 2%, there might be little incentive for you to refinance your loan.

However, if you can lower your monthly payments by $200 or $300, then it’s probably worth looking into refinancing your mortgage, even if that means you will be locking yourself into a low-interest rate for the next 5 to 10 years. Or perhaps take out another line of credit using the equity in your home as collateral.

When To Refinance Mortgage When Interest is Stable

Another time when you might consider refinancing your existing mortgage is when interest rates are stable. That could make sense because with rates remaining the same, there wouldn’t be any penalty attached to closing out an existing mortgage contract and taking on a new one should interest rates decrease further still, something which seems inevitable at this time.

Another advantage of refinancing during this period is that you might be able to replace your current fixed-rate mortgage with a floating rate. That means your monthly payment could become even less expensive if rates drop further over the next few years as expected. However, if interest rates increase, it shouldn’t have as much of an impact on your loan since you will now have a floating rate attached to your new mortgage.

Most mortgages in Canada are now either variable or adjustable-rate mortgages because homeowners feel these loans offer greater flexibility and affordability. In a rising interest rate environment, especially where money becomes more expensive to borrow, these flexible loans can help mitigate the worst effects that higher rates can cause to home budgets.

Of course, if you do decide to refinance your existing mortgage when rates are going up or down, you’ll need to make sure that the new rate is a fixed one because variable rates can fluctuate dramatically and even go up as high as prime plus 9.0%.

What You Should Know Before Refinancing Your Mortgage

Another thing to keep in mind is that refinancing your mortgage could mean an increase in your monthly payment even if you’re getting a better rate. Why? Because some lenders may also require you to pay for the appraisal, title search and other legal fees associated with closing out an existing loan contract.

Before you refinance your current mortgage, it’s worth doing some research first by getting quotes from different lenders so you can find out how much money you could potentially save by refinancing. This way, there won’t be any surprises when borrowers receive their final quote following their application process or lock-in period, which typically lasts between 30 days and six months. During that time, they cannot switch lenders without paying fees.

Closing Thoughts

With more extended amortization periods now being offered by some mortgage lenders, refinancing your existing home loan may well become an even more attractive strategy today. That is especially true now that interest rates are so low and likely to remain this way for the foreseeable future.

If you do decide to refinance your mortgage, make sure before signing on the dotted line that you’re aware of all the terms and conditions involved with closing out your current loan contract in addition to any other fees that may be associated with this transaction.

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You can get in touch with our Mortgage experts for loan rates and advice. We also have more articles covering different aspects of Mortgage in Canada available at Best Mortgage Online for your reference.