Mortgage Refinance Toronto
Many homeowners in Toronto use a financial tool called a mortgage refinance in order to save interest on their mortgages, finance a large project, or consolidate debt. If you are considering refinancing your mortgage, here are a few things that you need to know.
What is a mortgage refinance?
A mortgage refinance is when you break your first mortgage in order to get a new one – often at a lower interest rate. You may refinance for the current balance that is left on your mortgage, or you may use your refinance as an opportunity to borrow from your home equity. Most lenders will allow you to borrow up to 80% of your home equity. This means that if you had $200,000 in home equity on your first mortgage, you could refinance and get up to $160,000 in cash to use as you wish. This amount would be added to your mortgage and you would make monthly or bi-weekly payments on it.
Why should you choose a mortgage refinance in Toronto?
There are many reasons why Toronto homeowners may choose to refinance their mortgages. They could do so simply to save interest. For example, if interest rates have gone down since you got your mortgage, then refinancing could potentially save you thousands of dollars over the amortization period of your mortgage. Or perhaps your current mortgage is a bad credit mortgage with a higher interest rate. If you have improved your credit and can qualify for a better rate, it can make good financial sense to refinance.
Refinancing is also a good way to borrow from your home equity. Reasons for doing this include consolidating debt, funding a home improvement, paying for a child’s tuition and so forth. This is usually a much less expensive way to borrow money than other options such as credit cards or personal lines of credit.
How to get the best rates for mortgage refinances?
Like all mortgages, when you get a mortgage refinance, there are a number of lenders and rates available. The best rates will typically be available from traditional lenders and for this, you will need to have good credit to qualify.
Whichever type of lender you use however, you are most likely to get the best rate when you work with a professional mortgage broker. When you work with a mortgage broker, they will compare lenders and rates on your behalf to help you get the best deal.
Even if you wish to continue working with your current lender, a mortgage broker can help by negotiating a good rate for you for your refinance.
How to get a mortgage refinance even with bad credit.
Although the best interest rates are reserved for those who have good credit, you will be happy to learn that even if you have bad credit, you may still qualify for a mortgage refinance. In fact, a mortgage refinance can even be used to help you rebuild your credit if you are using it to consolidate your debt.
To get a mortgage refinance with bad credit, you will most likely have to do it through an alternative or private lender that specializes in helping those with bad credit. You should work with a professional mortgage broker in order to find the lender that is right for your situation.
Advantages of using a mortgage broker for a mortgage refinance.
While it is possible to refinance your mortgage without the assistance of a mortgage broker, this is not advisable for a number of reasons. As an expert in the mortgage industry, your mortgage broker will help you with the following.
- Determining if a mortgage refinance is the right choice for you. Although there are a lot of advantages to getting a mortgage refinance, it is not the right choice for everyone. Since a mortgage refinance requires you to break your current mortgage, there will be a financial penalty for doing so. If you have recently renewed your mortgage, this penalty could be substantial so it may make more sense in this case to use another strategy such as a second mortgage. A professional mortgage broker will run the necessary calculations to see if a mortgage refinance is the best strategy for you.
- Helping you find the best rate. Even a small difference in your interest rate can equate to a lot of money saved (or lost). Your mortgage broker will take the time to find you the best rate for your mortgage refinance.
- Helping your find the right lender. In many cases, you may need to work with an alternative or private lender. This is especially true if you have bad credit or are self-employed. Mortgage brokers work with a wide range of specialty lenders. They know which ones are reputable and which ones you should avoid.
- Ensuring all of your documentation is in order. Missing documentation or information on your application can result in your approval getting delayed. It can even result in you getting turned down for a mortgage refinance. Part of your mortgage broker’s job is to ensure that everything is in order with your application so that you can get your approval as quickly and as smoothly as possible.
- Answering your questions and guiding you through the process. Refinancing your mortgage can feel like a big step and you may be uncertain or have questions about it. Your mortgage broker is there for you to answer your questions and guide you through the process.
Is refinancing your mortgage the right choice for you?
As mentioned, there are many benefits to refinancing your mortgage as well as a few drawbacks such as a penalty for breaking your first mortgage. The best way to know if a mortgage refinance is a good option for you is to meet with a mortgage broker who can run some calculations to determine exactly how much money you stand to save with your refinance and compare this to any penalty you may have to pay.
If you would like to learn more about mortgage refinancing and whether it is the right fit for you, contact us today to speak with one of our Toronto brokers.