It’s important to be aware that a collateral mortgage has its downsides. Mainly, it makes it tougher to switch lenders when your mortgage comes up for renewal. There may be additional costs involved in switching, too.
A third reason you might refinance your mortgage is to take advantage of lower mortgage rates. If you have a fixed rate mortgage and you’re locked in at a higher rate, you might consider refinancing your mortgage and locking in at today’s lower mortgage rates. (Since you’re refinancing, you also have the opportunity to take equity out of your property if you so choose.)
Before you refinancing, it’s important to be aware that you’ll need to pass the mortgage stress test. You’ll need to qualify at the greater of your mortgage rate plus 2% and the Bank of Canada’s five-year benchmark rate. If you’ve taken on a lot of additional debt and/or your income is lower than when you were first approved for your mortgage, this may no longer be an option.
There may also be legal costs and mortgage penalties involved in refinancing your mortgage. You’ll want to weigh those against your costs savings to see if it’s worth it before breaking your existing mortgage.