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How To Refinance a Principal Mortgage

How To Refinance a Principal Mortgage in Ontario

No matter what the personal reasons may be, many Ontario homeowners are looking at newfound property appreciation during 2020 and the first half of 2021 and considering the option of refinancing by taking out a new mortgage on their property.

There is no doubt that the Ontario property market is on fire and continues to outperform the expectations of real estate professionals. We have all had to endure a drawn-out and severe pandemic. While the assumption by mortgage professionals was that Covid-19 would bring the property market to a halt with a predicted potential double-digit loss in property value across the Province, the opposite occurred. 

Ontario homes have increased upwards in value in Toronto and GTA hotspots. According to the Ontario Real Estate Association (OREA), the year-over-year increase in value of single-detached dwellings has increased by 32% from June 2020 to June 2021. In Toronto, the average price of a single-detached home has now risen to $1.1 Million. This housing trend has been mirrored in other areas throughout the Province. 

What options exist for the Ontario homeowner who wants to tap into home equity to take out a new mortgage? Depending on a homeowner’s credit standing, household income, degree of equity, and overall debt ratio, different lending options exist. There are also various types of mortgage options open to the interested homeowner. Why not make your home work for you after you have diligently worked hard to pay off your principal mortgage?

What Types of Lenders are Available?

For the interested homeowner, several lending options remain a possibility. The mortgage industry has classified the various lending options into three broad categories. Which category of lenders may be applicable largely depends on the unique financial picture of the homeowner. 

Lenders will be asking: 

  • Is there sufficient household income?
  • How high is the current household debt ratio?
  • What is the appraised value of your home
  • How strong is your credit?

Of all the criteria that Ontario lenders assess, credit remains top of the list when it comes to approving refinancing options utilizing your home equity. Lenders in each of the three categories will be weighing credit differently:

  • A Lenders– These lenders are represented by the banks. To approve mortgage financing credit must be very strong and sufficient household income is expected along with any additional financial assets. Borrowers are put through rigorous mortgage stress tests that were increased on June 01, 2021.
  • B Lenders– These lenders are represented by credit unions/trust companies. While the criteria for mortgage approval is less stringent than their bank counterparts, a credit score of at least 550 is expected and easy-to-demonstrate income is preferred over freelance, contract-based or self-employed salaries. 
  • C Lenders- These lenders are represented by private lenders. Private lenders can look to criteria beyond income type and creditworthiness and arrange mortgage loans despite poor credit. The appraised value of the property, additional financial assets will be weighed when determining mortgage amounts.

Getting a New Mortgage by Tapping into Your Equity

Fortunately for a motivated homeowner, there also exists an impressive selection of mortgage loan options when a homeowner wishes to refinance their principal mortgage. If your credit score is low, it may be advisable to consider a private lender (C lender) who can negotiate a private secured mortgage.

Mortgage Broker Store is in a position to help negotiate private mortgage refinancing. We will also be able to point you towards a suitable private lender with access to a broad network of Ontario-based private lenders. Refinancing using existing equity will be based on the calculated Loan-To-Value (LTV) which will not exceed 75%, a recent appraisal of your property, and the degree of equity in your home.

Refinancing options for homeowners wishing to use their home as collateral and existing equity can include:

  • Debt consolidation loans- Using existing equity, a debt consolidation loan in Ontario can provide the funds necessary for any pressing renovation and updates to your property. By renovating and upgrading your property you will be increasing the value when it comes to resale.
  • Home equity loans- By tapping into existing equity financial concerns can be addressed such as paying off outstanding debt payments, education expenses, or helping pay your primary mortgage payments reliably.
  • Home Equity Line of Credit (HELOC) Acting like a revolving line of credit enabling funds to be available as the balance is paid off, a homeowner only needs to pay the monthly interest on the line of credit.
  • Home Renovation loansIf you have multiple debt payments, a debt consolidation loan can help merge these payments into one manageable monthly payment. This will enable all associated housing costs to be covered more comfortably.
  • Bridge FinancingServing as a bridge between financial obligations or providing the necessary short-term funds to meet immediate financial objectives. Bridge loans are typically 3-6 months in length and are structured to provide a temporary financial solution.

Refinancing Your Principal Mortgage

Another option that utilizes existing equity is the ability to refinance your first mortgage. The same criteria will be used as the other types of second mortgage options however if the terms of your first mortgage are increasingly difficult to meet, a private mortgage loan could provide the funds to help cover the first mortgage costs. The term length could be changed, the interest agreement, and if the first mortgage has fallen into default, any arrears owing can be covered by refinancing your principal mortgage. 

By providing funds that were locked up in your property in the form of equity, and monthly housing costs, in addition to the monthly mortgage payments, which can be made more easily.

Mortgage Broker Store Can Negotiate Different Types of Mortgage Loan Options

With access to a broad network of well-established and experienced private lenders across Ontario, Mortgage Broker Store can connect an interested homeowner to private lenders to discuss various refinancing options. We will also be able to negotiate private financing directly, depending on your specific financial objectives. Poor credit and non-traditional income need not be a barrier to obtaining a bridge loan or any other loan to help pay off any pressing monthly liabilities. Don’t hesitate to contact us at your convenience to discuss the best options to suit your unique financial circumstances.

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.

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