Mortgage Refinancing is easy and can be well worth the effort.
Perhaps this is the right time to tap some of your home equity for a renovation project? Or maybe you’re considering a cottage or vacation property, or maybe want to use some of your equity for other long-term investments. You can also take a look at your other debts; many Canadian homeowners have taken advantage of historically low rates and rolled all their other higher-interest debts into their mortgage.
Refinancing your Mortgage
Breaking your contract for a lower interest rate can save you money over time, depending on the penalty, the size of your outstanding mortgage and the interest rates. If you hold a variable rate mortgage, then expect to pay a penalty of three months interest, and if you hold a fixed rate mortgage, then you will pay the greater of three months interest or interest rate differential penalty (IRD).
What is a Heloc or Line of Credit
A HELOC is a line of credit that is secured against your property. You can get a HELOC for up to 80% property’s value.As your mortgage is paid down, the available HELOC limit increases. With a HELOC, your home’s equity becomes collateral to provide you with a supply of credit You decide how much credit you need, when you need it, then repay it when you can.
How do I ‘Blend and Extend’ my Mortgage
Some lenders will allow you increase the size of your first mortgage by blending your existing mortgage to a new additional loan at current interest rates.
A second [mortgage] would be a short-term solution until the first mortgage matures and you could put the two together
BEST ADVICE: Have a clear idea of what you’re trying to achieve and sit down with your current Lender to discuss their solutions. Then approach a Broker to compare offerings.
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Questions & Answers on Refinancing your Home
Private Lenders for Mortgages with Bad Credit or Under 20% Equity
Private lenders are individuals or groups of individuals that are in business to make money. They have financial resources available and cater to areas that institutional Lenders do not. They look at equity in the home rather than the borrowers credit rating. They take greater risks than the banks and charge higher interest rates and fees as a consequence.
How are Mortgage Lenders Prepayment Penalties Calculated
If you are breaking your mortgage in the middle of your term to access equity or lower your interest rate your lender will charge you a prepayment penalty. For fixed mortgage rates this penalty is the greater of three months interest or the interest rate differential payment (IRD). For variable mortgage rates this is simply three months interest.
Why do I need to do a credit check to refinance my mortgage
There are two reasons that lenders need to do an up to date credit report (even your current Lender). The report from the credit bureau will list your monthly commitments, ie monthly car payments, retail store cards, credit card minimum payments etc these results added to your future mortgage payment will allow the lender to calculate your total monthly commitments. Secondly the report will give you a credit score based on your historical payment history, this tells the lender how likely you are to repay the loan and whether or not your payments will be on time. There are lenders for every situation from bad to perfect credit. Once the Broker has the report he will know the appropriate Lenders to submit your application to.
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