A guide to mortgage refinancing in Toronto
Whether you need $10,000 or $50,000 – Alpine Credits is the best alternative for mortgage refinancing in Toronto
A mortgage refinance replaces your present home loan with a new one. Ordinarily, people refinance mortgages to overcome the interest rate, cut monthly payments or tap into their home’s equity. Conversely, people also refinance a mortgage to pay off their loans quickly.
Alpine Credits has helped thousands of Canadians refinance their mortgage and save money in the long term.
Refinancing your mortgage to get a lower interest rate can be a tricky process. At Alpine Credits, we make the process easy and hassle-free. Keep reading as we guide you through it.
What are the benefits of refinancing your mortgage?
Mortgage refinancing can be very beneficial to homeowners. It gives them the flexibility to improve the terms and conditions of their existing mortgage loan. Here are a few examples of how mortgage refinancing can help homeowners.
If you have built up equity in your home over a long period of time. Refinancing can allow you to use that equity (current value of home-remaining balance on your mortgage) and convert it into cash.
This is known as a cash out-refinance. With this option, the new loan amount you take out is higher than your current mortgage balance. The difference between the two is transferred to you in cash.
For example, let’s say your home is valued at $300,000 currently and you owe $200,000 on your mortgage. If you decide to a cash-out refinance and borrow an additional $50,000, your new mortgage would be $250,000. The $50,000 difference (between the new loan amount and previous mortgage balance) will be handed to you in cash.
Refinancing can help you consolidate other high interest loans sources like credit card debt or personal loans into your mortgage. You can lower your overall interest rate by rolling these debts into your mortgage. This is because you have a single monthly payment with interest rather than worrying about multiple payments and interest rates.
If interest rates have dropped since you secured your first mortgage, refinancing will enable you to replace your first mortgage with a new loan at a lower rate.
How to qualify for mortgage refinancing in Toronto
The mortgage refinancing process follows similar steps as the initial one including application, review followed by disbursement upon approval. Below are some things to keep in mind when applying for refinancing.
Make sure you have owned the home you wish to refinance long enough. Although the holding period varies across lenders, a minimum of 6 months of ownership is required.
The low interest rates offered by banks in recent years has made real estate a lucrative market. Many homeowners are looking at taking advantage of these interest rates to reduce their monthly payments.
Mortgage lenders inspect proofs of all specific expenses and pre-existing fixed commitments that you have. They also inquire about household bills, child support, and personal investments.
As lenders, they should be able to believe and have evidence that you will make payments even if interest rates increase. They may decline your mortgage application if they suspect that you might be unable to repay the loan.
The first stage typically includes gathering simple information to determine how much you can pay monthly and which sort of mortgage(s) you will require. Your mortgage broker will commence a systematic ‘fact-finding’ and a quantitative affordability appraisal to gather proof of your revenues, actual expenses and verify your accounts.
You will are asked a series of questions by your lender or mortgage broker to determine the kind of mortgage you would like and how many years you want it to last. They will also try to ascertain your financial condition without too much digging. This is usually used to determine how much money a lender may be inclined to lend you.
This step includes your mortgage application submission. The lender or mortgage broker will provide you with a complete examination including a thorough affordability evaluation, which will include your revenue proof and essential expenses.
Signs a mortgage refinance in Toronto is right for you
You might be worried about the added fees and closing costs of your current mortgage outweighing the benefits of refinancing. The indicators below might help you figure out if a mortgage refinance is right for you.
It’s important to remember that a lower interest rate will save you money. However, if the refinanced loan increases the time it takes you to pay off your mortgage, you might end up paying more interest. Keeping in mind length of your mortgage term when refinancing is essential.
You must crunch the numbers to decide if a mortgage refinance is worthwhile. Determine the break-even rate, the number of years it would take to pay off your new loan versus the existing one. If you plan to stay in your current home long enough, refinancing might be worth your time and money.
Refinancing comes with closure costs, same as your first mortgage. Depending on your loan arrangement, you will be required to pay the fees and closing costs, or they may be rolled into the new mortgage. Calculate the money you are saving against the closing costs, if the difference is substantial refinancing is a good choice.
How much equity do you have?
To find out how much equity you have in your home, simply subtract the amount you still owe on your mortgage from the current value of your home. For example, if you have a $100,000 balance le on your mortgage and the current value of your home is $500,000, your home equity value would be $500,000 – $100,000 = $400,000.
A home equity loan allows you to convert your home’s locked value into capital which can help you meet your financial needs.
Frequently asked questions
There is no universally perfect moment. The decision depends on individual needs and market conditions. However, falling interest rates and growth in your monthly incomes are indicators that you should review the option.
Your lender should be able to go over your loan details and give you a reasonable estimate of the cost of refinancing and what you will pay per month.
You could also use online calculators available to gauge your monthly savings after having paid the mortgage amount.
Refinancing your mortgage can be a difficult decision to make. One must take into consideration multiple factors before arriving at a decision. However, Alpine Credits can support you in this process.
The effect of mortgage refinancing on your credit score depends on several factors. If you apply for several loans at once or fail to make payments on time upon approval, your score could drop. However, handled properly, mortgage refinancing should have no lasting negative effect on your credit score. In fact, if you use it to consolidate debt or otherwise improve your financial situation, your credit score could increase.
Contact us at Alpine Credits for a one-on-one discussion regarding your financial situation. We will help you determine the potential impact of mortgage refinancing on your credit score.
With Alpine Credits, you can consolidate multiple debts; small and large, secured and unsecured. This differs from traditional banks and other lending institutions that can limit your options.
While this isn’t mandatory, it’s highly recommended that you consult a lawyer while refinancing. They can offer you guidance and help expedite the process by reviewing your mortgage documents and ensuring that all legal requirements are met.