Smarter Loans Inc. is not a lender. Smarter.loans is an independent comparison website that provides information on lending and financial companies in Canada. We work hard to give you the information you need to make smarter decisions about a financial company or product that you might be considering. We may receive compensation from companies that we work with for placement of their products or services on our site. While compensation arrangements may affect the order, position or placement of products & companies listed on our website, it does not influence our evaluation of those products. Please do not interpret the order in which products appear on Smarter Loans as an endorsement or recommendation from us. Our website does not feature every loan provider or financial product available in Canada. We try our best to bring you up-to-date, educational information to help you decide the best solution for your individual situation. The information and tools that we provide are free to you and should merely be used as guidance. You should always review the terms, fees, and conditions for any loan or financial product that you are considering.
In Canada, if you’ve taken on a mortgage that’s amortized over a long period of time, fortunately for you the re-financing options are very plausible. Since there are so many different mortgage companies, there are various options to consider when thinking about re-financing. Depending on what you obtained your mortgage for in the first place, finding a lower interest rate to refinance with should be an easy task especially if you have all of the information that you need. It doesn’t need to be a challenging or daunting task to refinance a mortgage, especially with the help of Smarter Loans.
In Canada, mortgage refinancing is made simple by Smarter Loans. We are prepared to guide you through refinancing your mortgagee entirely online. Refinancing your mortgage online greatly reduces the amount of time and energy required, especially since paperwork and wait times have been drastically reduced. We’ve already laid the groundwork by neatly organizing all of the refinancing options for mortgages into a directory below. If it’s a mortgage that you are interested in, all you need to do is scroll down and you’ll be able to compare all kinds of mortgage refinancing options that apply to your unique case.
Once you identify the one that works for you, simply click “apply now” and you’ll be able to apply to refinance your mortgage with the interest rate that you desire. If the information laid out is overwhelming or confusing, you can also alternatively pre-apply with Smarter Loans and we’ll take care of the application on your behalf by finding a suitable option for you refinance your mortgage with.
We can help connect you with the top mortgage refinancing providers in Canada.
Mortgage refinancing is when you replace your existing mortgage with a new mortgage, usually with better terms than your existing one. When you refinance your mortgage, the funds from your new mortgage are usually used to pay off your existing mortgage.
There are several reasons why you might choose to refinance your mortgage.
A popular reason to refinance is to consolidate debt. If you’ve accumulated a lot of high-interest debt since you initially signed up for your mortgage, you might consider refinancing it. This often makes sense since mortgage rates tend to be a lot lower than the interest rates on credit cards and other forms of unsecured debt.
When you consolidate debt you have two choices. You can take out a new mortgage for the entire amount of your existing mortgage and outstanding debt. Or you can take out a new mortgage for just the amount of your existing mortgage and a separate home equity line of credit for the debt that you’re rolling into your mortgage. This can make sense if you anticipate borrowing more money from your home later on.
Another reason you might want to refinance your mortgage is to access equity. The simplest way to do this is with a home equity line of credit. With a home equity line of credit, you can access up to 65% of the value of your home (provided that your mortgage and home equity line of credit together don’t total more than 80% of the value of your home).
There are two main types of mortgage charges: standard charges and collateral charges. If your mortgage has a standard charge, you’ll need to refinance it to a collateral charge so you can set up a home equity line of credit that allows you to borrow against the equity in your home.
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.
Mortgage refinancing is when a property owner ends their current mortgage agreement, and takes out a new one in its place. The new mortgage does not need to be for the same amount as the old one, and it does not need to be with the same company, but it must be for the same property. This is why it is a “refinancing,” and it differs legally from selling your home, closing out your old mortgage through the sale, and then purchasing a new home with a new mortgage. In effect, a mortgage refinance is a way to reset your mortgage in its entirety while remaining where you are.
People refinance their mortgage for many different reasons, including:
Over time, property values tend to increase; simultaneously, you are making regular mortgage payments which are incrementally lowering the overall amount you owe on your mortgage. This means that the difference between what your property is worth and what you owe on your mortgage gets greater over time – and it is this difference that we call “equity.” It is essentially how much of the property is entirely yours, mortgage-free. Many people refinance their mortgage in order to access the equity that has built up in their home since they originally purchased it. The funds released by doing this go into your pocket.
The funds released when refinancing a mortgage can be used in many ways, including:
But no matter how you choose to use the funds released in this manner, your first priority when refinancing your mortgage is to pay off your old mortgage, including any prepayment penalties you incur. The amount of money you have left after doing this is what you will have available to spend.
In Canada, most people are able to borrow up to 80% of their property’s value with a mortgage. So when refinancing, you need to understand your home’s current market value, and 80% of this figure will be your maximum borrowing amount. Remember that you will need to pay back your old mortgage as soon as you get your new one, so the total amount you’re left with after refinancing depends on your old mortgage’s value and any penalties you have to pay.
Mortgage refinancing is never free, and the biggest cost usually comes from prepayment penalties for breaking your old mortgage agreement. The size of these penalties varies, and depends heavily on the type of mortgage you’re breaking. Fixed rate mortgages tend to have very high prepayment penalties – averaging $12,000 – while the standard charge for breaking a variable rate mortgage is three month’s interest.
Check the fine print of your current mortgage agreement before taking any steps to refinance, as the scale of penalties may make refinancing unaffordable. And also remember that you’ll probably need to pay a valuation fee for your new mortgage, and also legal fees to finalize all of the paperwork – these usually cost around $1500.
Choosing the right time to refinance your mortgage is a personal decision, and it can be influenced by many factors other than the pure financial costs. But if a good deal is your primary driver, then doing the maths will help inform you of the best time to pull the trigger on a new mortgage.
You need to consider your current interest rate, the best rate you can get on a new mortgage (bearing in mind that refinancing rates are not the same as advertised new purchase rates), and the size of the penalties you’ll incur for breaking your existing mortgage. You need to offset the cost of fees and penalties against how much you’ll be saving per month over the life of the new mortgage to determine whether refinancing is cost-effective.
It is possible to access home equity or consolidate your debt via your property without refinancing your mortgage. Home equity lines of credit (HELOCs) are common in Canada, and these instruments are taken out against the equity in your home, but are separate from your mortgage. Another alternative to mortgage refinancing is taking out a second mortgage; this practice is also common, and if you take out the second mortgage with the same lender as your first, then you are likely to be offered a “blended” mortgage that splits the difference between your first mortgage rate and your new mortgage rate. Be wary of this option though, as blended interest rates tend to be higher than average.
Refinancing a mortgage is an administrative task more than anything else, and it helps to be prepared. Follow these simple steps to complete your mortgage refinancing:
Remember that if you’re struggling to understand your options and choose the best new mortgage, you can talk to a broker or one of our experts for free advice and recommendations.