Refinancing and Managing your Mortgage
Heard about mortgage refinancing? In the past, most people who took out a mortgage doggedly continued with it until they had paid it off. These days, people refinance their mortgage much more frequently. The average duration of a home loan in Canada is about 5 years. Here we look at some of the reasons people in Canada refinance their home loan.

Q. When should I refinance my mortgage?
A. Whenever it makes financial sense to do so.

1. Lower Your Rate and Payments
The most common reason for people to refinance their mortgage is to get a better deal. But be careful you don’t become interest rate-fixated. When you refinance your mortgage, you need to consider fees and charges as well as the interest rate. You often have to pay charges for exiting your current mortgage, plus charges for taking out the new mortgage. You need to be sure that in refinancing your mortgage that you’ll be better off in the long run after taking into account all costs.

2. Debt Consolidation
Consolidate high interest rate debts such as credit cards, loans, or lines of credit. If your monthly bills have gotten out of control, you might be able to refinance your home and pay them off. The advantage of doing this is to lower your total monthly payments and keep your credit score high!

3. Renovation
If you carry out renovations, it often makes sense to refinance your mortgage and take out a construction loan so you only pay interest as building progresses. Once construction is over, it might make sense to refinance your mortgage again so that you consolidate the total amount you owe into a loan that minimizes your interest bill, while giving you a degree of liquidity.

4. Home Equity
Over recent years in the property market, houses have appreciated at a significant rate. e.g. a home you bought for $300,000 five years ago, might now be worth $500,000. Refinancing your mortgage with a home equity loan might let you tap into that extra $200,000 equity. Your equity could be used for many things including purchasing other real estate property, investing for retirement, or buying that second home you always dreamed about!

5. In Danger of Defaulting
Some people find they have borrowed more than they can comfortably repay, and they’re in danger of defaulting. There’s no shame in that. But don’t suffer in silence. If you’re having trouble making your mortgage repayments, talk to your Mortgage Broker about refinancing your home loan to make it more manageable.

Learn More about refinancing your mortgage