What is refinancing?
Refinancing means renegotiating your existing mortgage loan agreement, usually to access the equity in your home, or to lower other borrowing costs by taking advantage of a lower interest rate. Refinancing can help you consolidate debt or pay for other large expenses like education or renovations. When you refinance, you select new terms for your mortgage loan agreement.
If you refinance at the end of your mortgage term, you’ll probably avoid prepayment charges. If you decide to refinance before your term is done, the prepayment charges might be relatively small compared to the savings offered by getting a new mortgage loan with a lower interest rate.
Is refinancing right for me?
Once you evaluate your goals, you can decide whether refinancing makes sense.
- Debt consolidation. Merge higher interest debts into one manageable payment with a lower interest rate.
- Home renovations. Get the money you need to renovate or make repairs.
- Tuition. Cover education costs for yourself or someone else.
- Investing. Take advantage of an investing opportunity (speak to your tax advisor first).
What are the costs of refinancing?
Before you make the decision to refinance your mortgage, examine all potential costs. Prepayment charges may apply if the agreement is ended before the term is done. There may also be associated fees for property registration and valuation.
Fortunately, your new lender may cover some or all of these costs. And if you are able to take advantage of lower interest rates, your overall savings may make it worthwhile.
Use the Mortgage Prepayment Calculator to see how refinancing might work for you.
How much can I borrow?
Over the years, you’ve been building up equity in your home as you’ve paid down some of the principal with every mortgage principal and interest payment. Once you know the amount of equity you have in your home, you can determine the amount of money you can borrow.
What’s my home worth?
There are a number of different ways to determine the estimated market value of your home. Many realtors will help you work out a recommended selling price based on recent sales in your neighbourhood. Or you can pay to have your home professionally appraised. There are also a number of online real estate services which track real estate sales and provide daily updates on estimated property values.