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Mortgage Refinancing

What is  Mortgage Refinancing?

A  mortgage refinance in Ontario Canada is a new loan taken out by a borrower to pay off the original loan or the loan can pay off the last refinanced loan. The refinanced loan is typically in first position; however, it is also possible to refinance a second mortgage or home equity loan.

Types of Refinance Mortgage Loans

If you are presently have a mortgage with a fixed rate of interest, this does not mean that you can’t take out a different type of loan when you refinance your mortgage. However, before you consider switching out of a fixed-rate mortgage for another type, be sure to ask your broker about the different  types of mortgage refinance loans that are available.

  • Longer amortization period.You may have the option of shortening your amortization period, this is the length of your mortgage, many mortgages have a length of 25 years. Borrowers can extend the length of the loan which can lead to reduced monthly payments. Therefore what was originally a 25 year term mortgage can become a 30 year term mortgage.
  • Bigger mortgage. By including the costs of your new loan into the original loan, you are actually taking out a bigger mortgage. The larger mortgage will eat into  some of your home equity. The same will happen if you take out cash, called a cash-out refinance, your mortgage loan balance will be increased.Many borrowers take out cash from a mortgage refinance in Ontario Canada to pay off bills incurred by unsecured purchases or to pay off credit cards. Paying off unsecured credit cards eliminates present debt, you may want to consider a credit counselor at this point.

Benefits of Mortgage Refinance

  • Lower monthly payment. If you plan to stay in the home long enough to break even on the refinance costs, a lower interest rate and payment will result in greater monthly cash flow.
  • Shortening the amortization period. If your lower interest is substantially lower than your previous rate, you might want to consider shortening the term of your loan in exchange for a slightly higher mortgage payment. Before you do this, figure out if you could invest that extra principal portion elsewhere for a better rate of return.
  • Cash in hand. Some people use the cash from their refinance to invest in products that have a higher rate of return than the new interest rate.
If you are still unsure about the benefits a mortgage refinance in Canada give us a call and a mortgage broker call help explain the best option for you.

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