Refinancing Your Home

HOW MUCH CAN I GET?

Whether it’s for some new furniture, some house upgrades or to cover some monthly costs, the mortgage rules allow a maximum amount of up to 80% of the appraised value of your home to be available for a refinance.

WHAT IS THE MORTGAGE RATE FOR A REFINANCE?

If you qualify, the rate will not be the advertised rate that you see from major lenders. Typically, the rate for a refinance mortgage is about 0.3 – 0.4% higher than the advertised rate on a 5-year fixed term. You also have the option of getting an extended amortization of 30-35 years to help offset the higher monthly payments.

WHAT IS THE COST TO REFINANCE MY HOME?

If you are refinancing your first mortgage and it is not time to renew yet, there will probably be a penalty. The amount of the penalty will vary, so before you sign a final refinance commitment with a lender, your mortgage broker will have you call your current lender and ask what the penalty would be to payout the current mortgage. The other possible costs with refinancing a first mortgage are an appraisal (cost around $350), and legal fees to discharge the current mortgage and register the new mortgage (cost around $1,500).

WHAT IF THE PENALTY IS TOO HIGH?

If the penalty and new mortgage rate are too high to fully refinance your home, your mortgage broker can often negotiate with your current lender to “top up” your current mortgage. If you qualify and if your current lender offers this option, it will save you from paying the penalty and losing your current lower rate. In rare cases, you may need to consider looking at a private mortgage in a new first mortgage position or getting a private second mortgage. Private mortgages in first position are usually at higher rates (around 10% plus fees). Private mortgages in second position are even higher at 12% – 15% interest plus fees.

WHAT IF I AM A SENIOR AND DON’T HAVE ENOUGH INCOME TO QUALIFY?

If you are over 55 years of age, have limited income and owe less than 50% of the value of your home, you may want to consider a CHIP Reverse Mortgage. Please contact me for details regarding your specific situation to make sure it is the best option for you.

While I don’t always recommend a refinance, in specific cases it may be your best financial option. Getting good advice from a mortgage broker is the best first step to make when you are considering the refinance option.

Jenni MacDonald (www.jmacdonald.ca) is an award-winning mortgage broker with Dominion Lending Centres The Mortgage Source (Lic.#10145).  She has over 12 years of experience in the Mortgage Industry and works with at least 40 lenders including banks, credit unions, and private lenders to find the best mortgage for each client. You can contact her by phone or text at 613-551-0639 or via email at [email protected]