How to Refinance Your Mortgage: What You Need to Know

Refinancing your mortgage can be a smart financial move but understanding your options is key to finding a solution that works for you today, and into the future.

A mortgage is a loan secured by property that helps you purchase your home that you pay off over time. You will be paying down the principal, the price you borrowed, plus interest.

Refinancing your mortgage means replacing your existing mortgage with a new one, on different terms. This can be with the same lender or a new one. A mortgage or refinance can be a serious and long-term commitment, so it’s important to be sure that you want to take on this type of loan.

Here’s what you need to know about refinancing your mortgage:

Reasons to Refinance Your Mortgage

  1. Get a better interest rate

This is done to allow a borrower to obtain a better interest term and rate which can save you a lot of money over time. For someone with a good credit history, a refinance can be a good way to convert a variable loan rate to a fixed as well as obtaining a lower interest rate.

2.  Access equity from your home

When you refinance your mortgage, you may be able to access equity in your home. This is money you can use for other expenses including:

  • Home renovations
  • Children’s education
  • Purchasing a new property
  • An investment opportunity
  • Anything else you’d like!

3. Consolidate debt

By refinancing your mortgage, you can consolidate your debt. This can help simplify paying back debts to creditors, since you’ll be rolling all your payments into one. Repayment is typically spread out over a longer period of time, providing you with some breathing room to pay back the loan.

 

Steps for Refinancing your Mortgage

  1. Determine Why You Want to Refinance your Mortgage

The reason why you want to refinance your mortgage will guide the mortgage refinancing process from the get-go. Borrowing to escape financial issues isn’t always a good reason to refinance your mortgage. Ensure you have a smart reason for refinancing.

2. Is Refinancing your Mortgage the Best Option?

The benefits of refinancing your mortgage are evident under certain circumstances. Start by discovering the value of your home and other homes in your market. If you determine that the market will remain stable and the value of your home will remain high, then you will be in a better position because you’ll have enough equity to cover the loan.

3. Crunch the Numbers

When deciding if you should refinance your mortgage, ensure you can afford to make the mortgage repayments. New interest rates may apply to the refinanced portion of your mortgage.

Keep in mind that the amount you can borrow when refinancing your home depends on the equity of your home. As the value of your home increases and you pay down your mortgage, your equity rises.

Also, be aware that mortgage refinancing can cause you to incur some fees. Consider the whole picture to determine if refinancing your mortgage is the right option for you.

 4. Consider your Credit Score

If you don’t have a good credit score this can make or break your loan application. Lenders will use this score to evaluate the likelihood of you paying back their loan. Build up good credit before applying to refinance your mortgage.

 5. Apply to Refinance Your Mortgage

Most lenders will require the following information in order for you to refinance your mortgage:

  • Proof of income
  • Home appraisal
  • Credit information
  • Assets and liabilities

 

Risks of Refinancing your Mortgage

There are risks if someone with bad credit or too much debt is looking to refinance. With possible high interest rates and an unstable economy, it is easier to default in mortgage payments. If you find yourself in this possible scenario, it may be time to consider refinancing, however, without the necessary information and knowledge, it may actually hurt you to refinance.

 

The cost of refinancing your mortgage

It’s important to be aware of administrative/setup fees that you will incur to refinance your mortgage.

  • You will need to pay appraisal fees to provide your lender with the current value of your home.
  • If you end your mortgage term early then there may be a penalty that you’ll need to pay to your mortgage lender. Consider refinancing at the end of the term to avoid this cost. Although, depending on the length of the term, it may still make sense to break your current mortgage and refinance.
  • If you decide to switch lenders to refinance your mortgage, there can be a mortgage discharge fee.
  • Depending on your province there will be mortgage registration fees to re-register your new mortgage.
  • Legal fees for a lawyer to help you inspect a refinancing offer, determine its legitimacy and complete the registration of the new mortgage.

 

Why Choose Doss Law to Help Refinance Your Mortgage

At Doss Law, we can be your best ally when refinancing your mortgage. We can help you navigate the process, communicate with your lender, and ensure your mortgage is registered correctly.

The services we provide include:

  • One-on-one consultations with a lawyer
  • Review of the mortgage commitment and the lender’s instructions
  • Preparation of all legal documents for closing
  • Discharge of pre-existing mortgage(s) and debts (if any)
  • Arranging title insurance policy

We make refinancing your mortgage simple. Get in touch with a member of our team today.