Refinance Your Mortgage

Can You Refinance Your Mortgage a Second Time or More?

Refinancing a mortgage is a good alternative to other borrowing options such as lines of credit and other loans. You can refinance your mortgage as many times as you need.  With that said, the lender you want to use may only allow a certain number of refinances or a specific credit score minimum to proceed. Talk to different lenders and see what their requirements are to get mortgage refinancing.

According to the Canadian Housing and Mortgage Corporation, about 29 percent of all Canadian consumers currently have a mortgage.  Some of these consumers may be facing reduced income and less work due to COVID-19, so mortgage refinancing could be the solution to help them save money on their monthly mortgage payments.

Is It Bad to Refinance Your Home Multiple Times?

It could hurt your credit score if you refinance your home multiple times within a period of a few years or less.

Credit bureaus, the organizations that create and track your credit score will lower your score if they notice that you are applying for credit from multiple lenders. This action tells the credit bureaus that you are low on funds and thus less likely to repay a loan. Try to only apply to one lender at a time to reduce this penalty on your credit score.

What Are the Disadvantages of Refinancing a Mortgage?

In addition to risking a poorer credit score, there are some additional costs and time requirements usually associated with mortgage refinancing.   How much you need to pay or how much extra work you need to do to refinance depends on the lender.

There may be pre-payment fees. These up-front fees can be significant, which may be a challenge while you manage other payments in the short-term.

You may also need to pay for a new property evaluation or appraisal and related legal fees when you register for refinancing.

When Should Your Refinance a Mortgage?

There are 3 main reasons why most people refinance their mortgage.

  1. Lower Monthly Interest Rate

You should consider refinancing your mortgage if interest rates are much lower than when you first got your mortgage. This can be very beneficial if your current mortgage still has a large amount of debt to pay off.

  • Access Your Home Equity

If you find yourself low on funds, refinancing your mortgage could provide the injection of capital you need. Mortgage lenders will allow you to borrow up to 80% of the value of your property’s equity. Equity is the value of your property that is debt free, or in other words, has been paid off.  For example, if you have $1,000,000 equity in your home, then you could receive up to $800,000 through mortgage refinancing.

  • Consolidate Debt

Many people refinance their mortgage to consolidate and pay off outstanding debts. Refinancing your mortgage can provide enough cash to consolidate and pay off credit cards and larger bills such as tuition and medical bills.

Consolidating debt means dealing with only one lender and one monthly payment, which can be significantly easier and less stressful to manage.

How to Tell if Refinancing Your Mortgage Will Save You Money?

Review the interest rate you are currently charged on your mortgage. If your mortgage interest rate is higher than the current interest rate offered by lending institutions, refinancing at a lower interest rate can lower your monthly payments.

Talk to your potential lender to find out what expenses you will need to pay if you proceed with refinancing. Depending on the lender you choose, refinancing your mortgage may come with several fees and penalties. These fees could impact your initial monthly payments, for a month or two. However, the money you save by refinancing your mortgage could be much greater than the fees, thus saving you money overall.

Mortgage loans will always have lower interest rates than credit cards and other kinds of loans because mortgages are secured by equity. If you have high credit card debt on one or more credit cards, you are paying more in interest on those debts than on a mortgage.  You could save money by using your refinanced mortgage to pay off the credit cards at an interest rate that is much lower on a monthly basis.

Mortgage refinancing is a great way to tap into your home equity and potentially lower your monthly payments. It can give you flexibility to consolidate debt, manage unexpected expenses, or even renovate your home.

In light of the ongoing COVID-19 pandemic, the Bank of Canada has dramatically lowered interest rates, there is an opportunity to save money on loan payments by refinancing your mortgage. You can try to use TD’s mortgage prepayment calculator to find out your property’s available equity on your own, or you can get advice and a free quote when you speak with a licensed broker from the Mortgage Broker Store.

In seconds you can find out how much equity you have and how you can use it to your advantage. Learn about what to expect from mortgage refinancing, discover Ontario lenders of all sizes, and get clarity on if refinancing is right for you.

About Jonathan Alphonso

Mortgage Agent, Web Developer, and Real Estate Investor. Together with Ronald Alphonso I run MortgageBrokerStore.com. I write about a variety of topics on Canadian mortgages and real estate. Our particular specialty is dealing with Ontario power of sale and foreclosure situations.