Every time you pay off and substitute your current mortgage for a new one, you are refinancing your mortgage. Your new mortgage can have different terms. And the interest rate may change. They’re all good reasons to refinance an existing mortgage.
What is a refinance mortgage?
Refinancing is not the same as obtaining a second mortgage. A second mortgage is a separate mortgage you take out on the same property. The terms may be different from your first mortgage and the interest rate may be higher. Refinancing is negotiating to swap your current mortgage for a new one. You can adjust your interest rate or add more to a mortgage when you refinance before or when a mortgage expires.
When to refinance mortgages
You may want to refinance and mortgage when or if:
Interest rates go down: Refinance mortgage rates in Ontario can change weekly. You want the best available rate you can get, while keeping the cost of changes as low as possible. When interest rates drop, you may want to consider an adjustable or variable rate mortgage. Short-term homeowners often save by paying lower interest rates now.
Your credit score improves: As you make payments, your credit score improves. As a result, lower interest rates may be available to you, decreasing your monthly payments. A lower rate could save you thousands of dollars a year. You can check out online mortgage calculators to see how much.
You get a shorter loan term: When interest rates drop, you may want to consider a mortgage with a shorter term. Your monthly payments will be similar, but you could pay off your mortgage quicker. That can save you interest over the life of the loan.
You lock in a fixed rate: Adjustable or variable rate mortgages can offer lower rates than fixed rate mortgages. But as interest rates rise, so do the rates you pay for your mortgage. Switching from a variable to fixed rate mortgage can lock in a lower rate. It allows you to enjoy the comfort and ease of a stable interest rate. If you are risk adverse or predict that interest rates will rise significantly, this may be the option for you.
You want to consolidate debt: Paying multiple loans, like credit cards and vehicle loans, can stretch your resources. Mortgage refinances allow you to roll all your debt into a single loan. Making one loan payment when interest rates are lower can save cash upfront if you need immediate relief. You may pay more in the long term, but you know your financial needs best.
You plan to make upgrades: New granite countertops, replacing outdated windows with triple glazed or a finished basement can all add value to your home. Mortgage lenders are happy to refinance if they can recoup their investment. Think of your lender as your financial partner in your home adventure.
How to refinance mortgages
Refinancing can be financially smart -- your savings typically outweigh any fees involved. Be aware that many of the same closing costs you paid when you bought the home may apply when you refinance. That could include title insurance, registration and legal fees. It's something to think about in deciding whether or not to refinance.
You can refinance a mortgage when the loan term expires or at any point in your mortgage contract three ways.
Blending and extending adds to your mortgage at current interest rates. When interest rates dip, adding new money to your existing mortgage lets you access cash while blending current interest savings and your existing mortgage rate.
"Breaking" mortgage contracts early to arrange a new mortgage loan incurs an average three-month interest penalty. Weigh the penalty against the savings or advantages you hope to get before you choose this option.
Taking out a HELOC or home equity line of credit secured against your mortgage gives you the flexibility of borrowing money any time you want. HELOC interest rates can be lower than traditional loans and, if you want, you can make interest-only payments. Your current lender can arrange it for you.
Your lender or a competitor may pay your legal fees when you refinance. Ask before you agree to refinance.
Refinancing and your credit score
Your credit score, income, employment and assets can help you qualify to refinance a mortgage.
Mortgage lenders like credit unions or banks look at if you make payments on time, carry credit card balances or are close to your credit limit. Having outstanding debts and how long you've had credit can also affect if you get a mortgage refinance.
Applying for repeated credit cards can influence your credit score -- a score of at least 680 gives you the most options. For instance, if you recently applied for multiple credit cards, it could indicate you have serious debts or are having problems getting credit.
Having no credit history can work against you. Taking out a secured credit card you pay in full every month improves your credit score more than having no credit card at all.
Legal advice for mortgage refinances
Whatever the reason for your refinance, we can ensure the process is quick, smooth and as enjoyable as possible. Our multiple offices and client-friendly 7-day-a-week opening hours give you the freedom to complete the transaction at a time and place convenient for you.
Pick up the phone and call us for a free quote or pop into one of our Greater Toronto Area offices when you can to get legal advice on mortgage refinance.
Your flat fee legal professional
Axess Law charges low flat fees to make legal advice easy to get. Mortgage refinances start at just $799.99 and up. Our all-inclusive quotes cover our flat rate legal fee, all third party fees and taxes.
There are no hidden fees or extras.
We make refinancing easy by keeping you up to date by phone or email. Our real estate lawyers video conference remotely from your home or office or meet you at any of our centrally located Greater Toronto Area law offices.
No fuss mortgage refinancing
Refinance with a minimum of fuss when you use an Axess Law real estate attorney near you.
We will set a date for you to come into one of our locations to sign your mortgage refinance documents or we can send someone to your home or office to finalize your transaction. We’re open 7 days a week with long hours, so you can choose a time that works for your schedule.
We let you know when your refinance is complete and you're on your way. It's just that simple.