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Mortgage Refinancing

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What does it mean to refinance your mortgage?

A mortgage loan refinance means renegotiating your existing mortgage loan agreement to use any available equity you have on your home. Meaning a homeowner can apply for the same amount as an existing mortgage or a greater amount. A homeowner may also apply to combine a first and second mortgage into a single first mortgage with a lower overall interest rate, or as a second mortgage on top of an existing first mortgage. As with a new purchase mortgage, a home refinance is secured against your home. A qualified mortgage broker can you help increase your chances of getting your refinance application approved at the lowest rate available to you.

As a homeowner you can refinance your mortgage on a home or commercial property with the help of an experienced and qualified East to West guiding you through the process. When refinancing your mortgage, you may be able to get a lower interest rate, better terms, longer amortization, and gain access to much-needed cash to use for a number of reasons. 

 

Types of Refinancing

Cash-Out Refinance
A cash-out refinance is a sort of refinancing in which the borrower obtains a new mortgage loan for a greater amount than what they owe on their existing mortgage. The difference between these two loan amounts is subsequently paid to them in cash.

The bigger loan will replace the borrower’s present loan, so there will be no extra monthly payment; nevertheless, the monthly payment amount will change under the new arrangement. Therefore, if you are pursuing a cash-out refinancing, we recommend that you ask your mortgage broker how this kind of mortgage refinance will influence your budget.

Rate And Term Refinance
A rate and term refinancing enables borrowers to modify their current mortgage’s interest rate and loan conditions. This choice is often more advantageous when interest rates are low and the borrower has the chance to negotiate more favourable terms with the lender.

The amount of the mortgage loan stays the same, but depending on the modifications made, you might wind up with lower monthly payments or be able to pay off your mortgage more quickly than you’d initially anticipated.

Cash-In Refinance
Contrary to a cash-out refinance, a cash-in refinance requires the borrower to invest a considerable amount of money into the refinancing process. By paying down a major chunk of your mortgage total, you will decrease your loan-to-value (LTV) ratio and improve your home’s equity, which might result in lower monthly payments or a cheaper interest rate. This refinancing option is often suitable for underwater mortgages (upside-down mortgages) or homeowners, who do not have a considerable amount of home equity.

Consolidation Refinancing
In some situations, a consolidation loan may be an efficient method of refinancing. When an investor secures a single loan at a rate that is lower than their existing average interest rate across several credit products, consolidation refinancing may be used. This sort of refinancing involves applying for a new loan at a lower interest rate, then paying off old debt with the new loan. This results in reduced interest rate payments on the total outstanding principal.

 

Should I refinance my mortgage?

Refinancing can help with certain goals:

  • Mortgage refinance for debt consolidation. Merge higher interest debts into one manageable payment with a lower interest rate. If you have high-interest debts, such as credit card debt or other loans piling up. Use the equity that is available in your property for refinancing your mortgage by taking the extra money and putting it towards paying off your existing debts.
  • Mortgage refinance for home renovations. Home renovations can be expensive and home improvement store credit cards usually have high-interest rates associated with them. Get the money you need to renovate or make repairs by refinancing your mortgage.
  • Mortgage refinancing for Investment. Take advantage of investment opportunities by refinancing and getting cash in hand to invest in, your business, real estate, .
  • Mortgage refinancing to pay for education. Refinancing your home can also be a great solution to paying back higher-rate student and education loans.

If your income and credit score has improved since you first took out your mortgage, or since your most recent mortgage renewal or refinancing, you might be interested in refinancing to secure a better interest rate and lower monthly payments. On the other hand, if you are in a tough financial situation, or need extra cash to pay for home renovations, fund educational expenses, or need quick accessible funds for investments. Refinancing your mortgage and borrowing additional funds may be the option for you. This will allow you to use that extra money without having to take out a second mortgage or a private mortgage.

Pros of refinancing

Access the equity you’ve built up in your home;

You can access up to 80% of your home’s value in total mortgages. If you step outside of the conventional banking system in Canada, then you can access up to 85% of your home or commercial property’s value and in some cases even 90% of the value of your home or commercial property’s equity as a first, second, or third mortgage. 

 

Consolidate your debts and lower your overall interest rate.

You can lower your business or personal debt through debt consolidation using the extra funds you draw out of the equity of your home through your refinance loan. If you have built up enough available equity in your home, then you should be able to pay out high interest on personal or business debts, using the money you get from your refinance loan. These debts can include a car loan, student loan, a line of credit, and other types of debts such as; bills, overdue tax payments, and high-interest credit cards.

 

Possibly get a lower interest rate and pay less for your mortgage over time.

Depending on the prepayment penalty fee that may be involved with breaking your mortgage, based on your agreement, you may have a great advantage by refinancing your mortgage to get a great new low rate that can lead to significant savings. The qualified mortgage brokers at East to West can help you crunch the numbers to make sure they present you with the best possible options for you and your needs.

 

Cons of refinancing

Refinancing fees.

Depending on a variety of factors, including whether your mortgage broker helps you refinance through a bank, a B lender, or a private lender, you will incur different costs when refinancing your mortgage. Legal costs, potential lender and broker fees should all be factored in when you account for what the cost will be. 

Borrowing time

Increasing the amount you are borrowing may lengthen the time it takes to pay off your mortgage.

Refinancing your mortgage could save you money, help you pay off your home faster, or unlock the equity in your home – if the time is right. Knowing your refinancing options is key to gaining the maximum benefit from your decision. Learn whether home mortgage refinancing is right for you. 

Contact one of our specialists to learn more

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