Refinancing your mortgage? Do's, don't and myths
Mortgage rates have fallen a lot in the past few years and are significantly lower than just a few years ago.
If you have a fixed-rate mortgage or your adjustable rate mortgage has reset to a higher rate, refinancing could save you a bundle. Not only would a lower interest rate mean lower payments, less interest and the total cost of your loan would also be less. Refinancing is not the same as renewing.
Don’t let refinancing spook you!
Refinancing: Before you take the plunge, think about how long you plan to stay in your home and how much the refinance is going to cost. If you’re not careful, refinancing could actually end up costing more than it saves!
What's involved in a refinance of your home?
Mortgage rules for refinancing changed in April 2012. Today, you must keep 20% of the equity in your home. For example; Your home is valued at $400,000. You can only access $320,000.
For example: If your mortgage is $280,000, you have access to $40,000 to help pay bills, invest in RRSP, consolidate debts, ets.
Speak with a mortgage broker who can see the whole financial situation.
Check your pre-payment or penalty to break your mortgage. Get it IN WRITING.
Don't have your home listed forsale when refinancing. Lenders won't like that.
Assume you can't qualify.
Take on more debts to pay off another debts.
Get an appraisal on your own. IF it is required, the lender will let a mortgage broker know, we can order on that can be used for any lender we need to seek financing from.
Myths & Common Questions
I was told I need an appraisal? No that is not true, many lender don't require appraisals. We as brokers can submit with the value and get is auto appraised for a nominal cost that is built into your mortgage. See the post on "When an appraisal is required"
I paid for the appraisal, how come I am not allowed a copy of it? It belongs to the bank. If your getting financing and need a value, the bank requires it, you pay for it and they keep it.
What impacts your approval for a refinance?
You have a line of credit that huge limit. Even if you own nothing, they will calculate 3% of the limit as a debt. You have a $20,000 Line of Credit, that is a $600 a month debt. Reduce the limit!
You owe CRA money. That has be be paid off first before they will give you money
You owe strata money. That has to be paid off too. Strata can put a lien on your property if you are to far in arrears. Not to mention fines!
Your credit score is too low. If you are below 620, many won't be able to help you.
You work part-time for less than 2 years.
To many late payments.
You have collections
Car payments...always a killer. Monthly payments are the key in why most people are declined.
Every bank, credit union and other lenders have different rules and guidelines. While your bank may say no, a broker can likely find a better solution.
To find out if refinancing makes sense for you, give me a call. As your local refinance expert, I can analyze your situation, review your current mortgage and outline all the costs and benefits. By accessing specialized lenders with highly competitive rates, I can help you come out ahead on your refinance!