Are you thinking of renovating your home, making an investment or starting your own business but lack the funds? Mortgage refinancing is a solution for you!
Re-mortgaging your home – How it works
Refinancing your home allows you to use the equity in your home to borrow money. You can refinance your home for up to 80% of the market value of your home, while subtracting the balance of your mortgage.
New interest rates and refinancing fees
Know that refinancing your home, allows you to obtain a new interest rate on the whole mortgage which, moreover, will be different from that of your original mortgage.
However, refinancing your home may involve additional costs such as legal fees (notary).
Why remortgage your home?
Here are 9 reasons why you can remortgage your home.
Re-mortgaging your home for renovation
By taking out a home improvement loan, you benefit from a lower interest rate than a regular credit card or loan, or a personal line of credit.
This type of financing is recommended if you are thinking of doing more extensive renovations and the repayment of this loan is done over a longer period.
For example, if you decide to refinance your home, it is possible to obtain an amount for your renovations based on your current mortgage balance. It is possible to obtain a refinancing up to 80% of the value of your property (fair market value).
Get a lower interest rate
Opting for a mortgage refinance allows you in some cases to benefit from a lower interest rate, when you are in an environment where rates are falling. Depending on the market, you may be able to get a better rate but this is not always the case.
Refinancing your home to build equity
You can refinance your home to access the equity in your property. However, you cannot access 100% of the equity or available equity because refinancing is only possible on 80% of the fair market value.
The equity in your home is the difference between the value of your property and the balance of your mortgage.
This equity in your home varies depending on:
- the payment of your mortgage
- the increase in value of your property
By taking out a home equity mortgage, you can access other offers, and increase the amortization period (for example from 18 to 30 years).
Contact our mortgage brokers for assistance.
Re-mortgaging your home to invest
You can also refinance your home to invest in an investment or rental property purchase. To do so, you must first evaluate the amount that refinancing your mortgage would allow you to obtain.
We recommend that you discuss this with our mortgage brokers.
Getting a second mortgage to buy a second home
If you want to buy a second home, such as a cottage, it is possible to finance it with a second mortgage. You can borrow up to 80% of the fair market value of your home, but you will have to subtract the balance from your first mortgage. This would be like refinancing to take out equity that you could use for the down payment on your second home.
You will continue to pay off your first mortgage while paying off the second.
Refinance your home to save money by consolidating debts
The funds you get from your mortgage refinance can also be used to pay off your debts (credit cards, personal loans at high rates). However, banks require current taxes on the day you submit your refinance application. Thus, it is often impossible to refinance your mortgage to pay your taxes.
The advantages of this option are:
- save oninterest rates
- extend the amortization period
- reduce your monthly payments
Refinance your home to invest in your RSP
Refinancing your home also allows you to invest in your RSP.
By freeing up funds through refinancing your mortgage, you will get a tax deduction.
This option must be evaluated beforehand.
Re-mortgaging your home to finance your retirement
It is possible to use mortgage refinancing to prepare for retirement.
Many products exist to do so, it is important to take measures when you are working, do not forget that to obtain a mortgage loan, employment income is essential, waiting for your pension and no longer having the income can limit your options.
It is therefore important to be well advised by a broker beforehand.
Re-mortgaging to start your business
Getting financing to start your business is not always easy. That’s why refinancing your home is an interesting option for you if you plan to start your business. In addition, there are some tax strategies to consider.
Don’t hesitate to discuss your options with our brokers.
When can you refinance your home?
You can refinance your home at any time. The only requirement is that you qualify for mortgage refinancing.
You don’t necessarily have to wait until your mortgage expires or renews to refinance.
Other possible options
In case of refusal of refinancing, there are other options to obtain liquidity, alternative banks allow to find solutions when qualification is impossible (Home Trust, Equitable Bank, B2B, Haventree Bank…)
Reverse mortgage
The reverse mortgage, also called “CHIP“, is a specialized product that allows you to use part of the value of your property to borrow cash without selling it.
Each month, interest is added to your loan and accumulates over the years, reducing the equity. In some situations, this option allows you to obtain funds when your retirement income does not allow you to live comfortably.
Borrowing on amounts already repaid through a Line of Credit)
You can access a portion of the equity in your property through a home equity line of credit, depending on your situation options may be available.
Don’t hesitate to make an appointment with our brokers to get advice.
