What is a Mortgage Refinance?

Mortgage Refinancing is a process to replace your current mortgage with a new one. In theory, the new loan will have more favourable terms and conditions than your original mortgage. However, it’s vital to understand breaking your mortgage may incur significant penalties that should influence your decisions to refinance. Make sure you’re acquainted with all the implications before you decide to do so.

Why Would You Refinance Your Mortgage?

There is any number of benefits you could get from a mortgage refinance, including:

  1. Reducing your interest rates. The most common reason to refinance your mortgage is to take advantage of favourable market conditions to lock in lower interest payments.
  2. Use the equity you’ve already accrued. You could refinance your mortgage to borrow more than you owe on your current loan. With this type of refinance option, you may be able to access up to 80% of the value of your home and secure a lower interest rate in the process.
  3. A refinance can help you consolidate debt. With enough built-up equity, you can use a refinance to pay off high-interest debt and consolidate the debt into your mortgage.
  4. Pay off your mortgage faster. If you have a long-term mortgage, you could refinance the mortgage to switch to a shorter mortgage and pay less interest over the life of the mortgage, even if the rate is initially higher.

How to Refinance your Mortgage in Barrie?

You have several options that each have their advantages and drawbacks, based on your financial situation:

  1. Break your current mortgage

As explained above, this could accrue substantial penalties, but it may be a viable option if the terms of your current mortgage are highly unfavourable.

  1. Add a home equity line of credit

This is sometimes known as a “second mortgage” and it effectively allows you to use your home’s accrued equity as collateral for a line of credit.

  1. Blend and extend your mortgage

This strategy restructures your mortgage by adding another mortgage with a lower-rate mortgage without breaking your current loan contract. It has the potential to avoid penalties associated with ending your mortgage early and still result in a lower interest rate.

Want to Learn More?

Mortgage refinancing is a complex process and it shouldn’t be approached hastily. Before you decide, speak with a licensed mortgage broker who will help you understand all the implications and what option is best to achieve your goals.