Refinancing homes, cottages and condos is a common financial transactions for Canadians. You must refinance a mortgage at the maturity date of the mortgage or if you want to increase the principal amount of the mortgage. In most cases refinancing your mortgage is a fairly straight forward process. If your credit rating has fallen you may have problems with your present lender and may need a mortgage broker to assist you.
Many clients choose to refinance their homes for different reasons. Some clients require money to for emergency bills such as medical bills. Some people have a long term plan to renovate their home that will require refinancing a large amount of money. In either case both clients will need to refinance their home to pay for the additional expenses.
Many of our clients are interested in reducing their monthly payments so that they can save hundreds or even thousands of dollars per month. This is one of the most powerful uses of mortgage refinancing. To get the full advantage of this option you should be aware of what your interest charges are for all of your various types of debt. Some of your debt may carry a high interest rate. Let’s use 29% as an example, other types of debt may have a lower rate of interest at 6% and the present Bank of Canada prime interest rate is around 2%. That means you are paying anywhere from 4% to 27% above the Bank of Canada prime rate for unsecured debt.
Unsecured debt always carries a higher risk and therefore the interest rate is much higher. The Bank of Canada prime rate is for secured low risk debt. To convert your high risk debt to low risk and low interest debt your need to secure the debt. In most cases this means that some type of asset such as a house, commercial building, property must be used to reduce the level of risk.
The most common asset that our clients have is their home. Homes with equity have a lower risk and therefore will reduce the risk on the unsecured debt and reduce the interest rate on the debt. The reduced risk can save our clients money every month.
To determine which refinancing options are best for you please call our mortgage broker. The consultation is free and we may be able to save you some money.