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Is It Worth Refinancing My Mortgage?

Should you refinance early in order to benefit from low rates?

Mortgage Refinancing

Mortgage Refinancing

Are you considering refinancing your mortgage? Early refinancing has become a bit of a trend; not surprisingly though, everybody is aiming to save money where they can. Securing a new loan with far better interest rates for your home might mean saving money on monthly low mortgage rate payments, or utilizing the extra money on other ventures like remodeling or making investments.

Does Everyone Profit from Refinancing?

The decision to break an existing mortgage should not be taken lightly. Despite what the advantages appear to be on the surface, there are penalties associated with refinancing; penalties that could potentially leave less change in your pocket than you had anticipated.

34% of those who recently renewed or renegotiated their best Canadian mortgage rate did so prior to their term expiring. The average time to pay off a mortgage is 7.4 years less than the original amortization. (Source: CAAMP).

Do Your Research and Speak with a Low Mortgage Rate Specialist

If now is not the time to refinance, bear in mind that mortgage brokers can review your best mortgage rate at any time, so it is always possible to do something about your mortgage when you are prepared. Request your broker to conduct a mortgage analysis to find out if renewing your loan at a lower rate is worth it.

Determine What Your Penalties Are

Until recently, the main penalty you would likely ever need to pay was 3 month’s interest. If you have a fixed rate, financial institutions now also take a look at the Interest Rate Differential (IRD) and will charge the greater of the two.

Find out If It’s Worth It

Penalties can surely get expensive, however that does not suggest it is not worth exploring. In order to keep your company, financial institutions can take 15 % off the balance of your mortgage to calculate the penalty, as opposed to using the full amount, leading to a lower overall penalty fee.

In many cases, banks will provide a blended rate for the remainder of your mortgage period. Your penalty will depend on your lender and how well you can negotiate.

Blended Rate:

It merges your present mortgage at its existing rate with any additional money you borrow at the current rates. Doing this enables you to benefit from existing lower rates without needing to pay a penalty. Nevertheless, some banks could use the posted rate, as opposed to the lower rates to determine your new blended rate.

What You Will Need to Qualify

In order to qualify for refinancing you will need to have at least 10 % equity in your house. Both you and your mortgage advisor are able to find out if long term savings outweigh the penalty.

Land Transfer Tax

How much is the land transfer tax in your province?

Canada map

Land Transfer Tax

Each province has a land transfer tax, with the exception of Alberta and Saskatchewan. Ontario, British Columbia, Prince Edward Island and the city of Toronto offer land transfer tax rebates for first-time homebuyers. Considering purchasing some property? Be sure to review land transfer taxes when completing your budget and considering your Canadian mortgage rate.

Ontario first-time homebuyer land transfer tax rebate

Equal to the full value of the land transfer tax up to a maximum of $2,000.

Eligibility

The buyer must be older than 18 years, occupy the home within nine months of purchase, and has not owned a home anywhere else the world.

Purchasing a home in Toronto incurs an additional municipal land transfer tax.

Toronto first-time homebuyer land transfer tax rebate

Eligible to receive a refund up to a maximum of $3,725.

Eligibility

The buyer must be older than 18 years, occupy the home within nine months of purchase, and has not owned a home anywhere in the world.

British Columbia first-time homebuyer land transfer tax rebate

First-time homebuyers and best mortgage rate holders are eligible to receive a full land transfer tax refund on homes purchased for $425,000 or less.

Eligibility

You are Canadian citizens or permanent residents, have never owned an interest in a principal residence anywhere in the world at anytime.

Alberta and Saskatchewan land title transfer fees

Though Alberta and Saskatchewan do not have a land transfer tax, there is a charge for title transfer fees. This fee should be considered when calculating your low mortgage rate and closing costs.

Making a Budget

Make a budget and find out the best ways to manage your mortgage money better

We recently took a look at the expenses beyond securing a low mortgage rate, the purchase price that you should anticipate to pay, and the expenses related to moving in. Now it is time to have a look at your ongoing month-to-month expenses, ways to pay off your Canadian mortgage faster, and the renewal process. This handy checklist will help keep you organized.

Budgeting for Home Expenses

Budgeting for home expenses calls for organization and some degree of restraint. Also, you will want to have funds reserved for unanticipated maintenance expenses.

Canadian dollars in a piggy bank studio cutout

Budget

Monthly expenses includes things like:

  • Property taxes
  • Maintenance and upkeep
  • Insurance
  • Mortgage payments
  • Heating and cooling
  • Hydro
  • Condo fees (if applicable)
  • Internet
  • Water
  • Cable
  • Telephone
  • Appliance rental (if applicable)

Budget Your Monthly Expenses

Beyond the expense of your monthly best mortgage rate, it is essential that you are aware of exactly what you are spending and where you are able to cut expenses. Budgeting can be time consuming and tedious! Making use of an online budgeting tool like Mint.com will help you save money and time as it automatically tracks your expenses and allocates them against your budget.

How Can I Save Money?

High Interest Savings Account
Make your savings work harder for you.

Save Money on Credit Cards
Altering your credit card can help save you money by providing you with a lower interest rate.

Paying off Your Mortgage Faster
Having your very own house is both thrilling and gratifying. Spend some time putting together a strategy to pay it off as quickly as possible. There’s no freedom like financial freedom.

 

Making an Offer

Improve the chances of having your offer accepted.

For Sale

Making an Offer

When you and your real estate agent locate what you think is the perfect home and Canadian mortgage rate, there’s no time to waste – it’s time to make an offer to purchase!

The Deposit

When you put an offer in to purchase a house, you are also expected to provide a deposit. The deposit assures the seller that you will actually go through with the sale when closing day arrives. Please note that the deposit and the down payment are not the same thing. A deposit may be as little as a few hundred dollars. It is important to note that, if your deal falls through, you may lose your deposit. Speak with your mortgage broker to get more information.

Chattels and Fixtures

Some sellers will entice buyers by offering them chattels or fixtures. Since it is not always clear what chattels and fixtures will stay, be sure to specifically list items that you’re unsure of. The last thing you want is an unpleasant surprise on closing day.

Closing Day

At this point, if your offer has been accepted, it’s time to close the deal. At closing, both parties must agree that all legal and financial obligations have been met. This includes any and all conditions that were written into the offer. If everyone agrees, ownership and possession will be transferred to you.

Compare Mortgage Rates

Before you make an offer, make certain you have the best mortgage rate locked down. Get pre-approved for a low mortgage rate online now. Not sure which mortgage product is right for you? Ask a mortgage broker to provide you with more information on fixed, variable, open, and closed rates for the best low mortgage rate.

Mortgage Fundamentals: Pre-Approved Vs. Pre-Qualified

What’s the difference?

Loan App

Pre-Approved Vs. Pre-Qualified

There are several stages of the Canadian mortgage rate approval procedure when you apply for a mortgage. It is essential to understand what they are and what they really mean.

What is Pre-Qualification?

This is the initial step of the low mortgage rate approval process wherein your mortgage broker takes a look at your overall earnings and financial obligation. The broker will determine your affordability by taking a look at your debt ratios (Gross Debt Service GDS and Total Debt Service (TDS)).

There are going to be a variety of conditions that you will need to meet in the pre-qualification before it is fully approved.

What is Pre-Approval?

Once accomplished, the mortgage broker will send your application to a lender who confirms your information with a certificate of approval. This generally includes a Canadian mortgage rate guarantee, which is typically valid for 60 and 120 days. You must comply with all the terms and conditions prior to approval.

What is Approval?

You have been fully approved for the mortgage at the best mortgage rate detailed in the agreement.

Advantages of a Mortgage Pre-Approval

A mortgage pre-approval enables you to lock in an interest rate. It offers additional security in understanding that you satisfy the initial financing requirements. It also enables any seller to understand that you are a serious buyer.

Most importantly, you understand clearly what you are able to purchase when you are buying a home.

Documents Required for a Pre-Approval

  1. Personal identification
  2. Income information
  3. Bank accounts
  4. Loans and other financial obligations
  5. Proof of financial assets
  6. Confirmation of the deposit and funds to pay for the closing cost

Each and every house hunt begins with a mortgage pre-approval. Start your quick online application today.