Refinancing Your Mortgage – To Your Advantage
Refinancing is the process that pays the existing mortgage and/or any other legal claims against the property and sets-up a completely new mortgage(s). Under current legislation, the maximum amount that can be refinanced is 80% of the property’s value.
Seasons change, and so do your mortgage needs. It could be a much needed (or wanted) renovation, your children’s education, or to purchase a second home or investment property. Perhaps it could be the need to consolidate other higher interest debt. Or simply, to take advantage of lower rates.
Refinancing your mortgage can help realize the above needs, but a mortgage professional from Homefund will help you refinance your mortgage to your advantage. We’ll compare which refinancing option is best for you, and of course, you get to make the final decision once you have the facts:
- Increase and Blend your existing mortgage
- Break your current mortgage for a new one
- Leave current mortgage as is, and add a Secured Line of Credit or Second Mortgage
Probable Reasons for Refinancing your Mortgage:
1. Consolidate debts:
Perhaps your monthly bills have gotten out of control, and just like a lot of unsecured and alternative debt, the burden of much higher interest may be eroding your financial wellbeing and stability. You might be able to refinance your home and consolidate the bad debt into good. The advantage of doing this is to lower your total monthly payments, and reduce the amount of interest you pay. You should have a mortgage professional at Homefund review your situation and make a recommendation.
2. Refinance a First & Second Mortgage into a new First:
There may have been a time you quickly arranged secondary financing on your home – a second mortgage or a line of credit, and at that particular time, it was the only way possible. But things change and get better oftentimes, and if now your qualification situation is better, you might want to consider about refinancing both mortgages into one – long term, it could be a considerable savings. Call a Homefund mortgage professional today to discuss your options, or simply apply online.
3. Financing a Renovation:
A home renovation, be it a minor or major one, can transform your home in new and more interesting living space, and create a higher value for a better sell, or provide many years of use and enjoyment by your family. There are a range of provincial and federal energy-efficiency rebates you may be able to tap into, which can help with some of the cost, but if you are doing major renovations (spending over $25,000), it could be less painful monthly with a mortgage as opposed to a an unsecured loan or line of credit. Explore your options, because the money that you save is your own.
4. Financing the purchase of other investments:
You can use the equity in your home to finance the purchase of investments and/or do a debt swap to transfer non tax deductible debt to become tax deductible. When done properly, you not only benefit from the lower carrying costs, but also you can make a portion or all of your interest tax deductible. Higher incomes tend to benefit more as they can cut their after tax income by almost half.
You may be also considering starting up a new business, or expand an already established one. Even when there are business loan programs available, sometimes their associated costs are high relative to the risk factor a potential lender sees. And sometimes, there simply are no other avenues to business financing, and your only options could be the equity in your home. You could benefit from the lower carrying costs of a secured line of credit or mortgage and also write-off the interest costs against the taxable incomes.
5. Financing the purchase of a Second Home or an Investment Property:
If you have the equity in your home and would like to leverage it for the purpose of purchasing a second home – this could be a recreational property your family uses, it could be a home for your child/children in university or college, or for a family member. The property must meet lender’s and insurer’s guidelines.
Or, if you have a desire to be a landlord, you could take equity out of your property by refinancing the mortgage to use towards the purchase of an investment property. Today’s rules require a down payment of 20% (plus extra money for closing costs). Before embarking on any arrangement, make sure you speak with a mortgage professional at Homefund to know your qualification limits.
6. Financing children’s education:
The best thing we can do for our children is be good role models to them, teach them to be responsible citizens, and give them a good base with a good education. With the high cost of many things nowadays, as well as education, it is sometimes difficult to have that kind of money in the bank, but you many have it in the form of equity in your home. Education is something they will never lose on.
7. Spousal Buyout:
Although it is never a planned event, but occasionally things don’t work out in relationships, and there are often assets and liabilities that need to be dealt with during the process. For most couples, their home may be their biggest asset and one partner may decide to keep the property and buyout the other partner. Fortunately, there are mortgage programs that can help facilitate that. One can obtain a mortgage up to 95% of the property’s value, subject to qualification and lending criteria. This entails having a finalized separation or divorce agreement (both parties have to be on title to the property prior to the legal separation), satisfactory income to meet debt servicing ratios, and acceptable credit rating. Also, the maximum equity that can be withdrawn is the amount agreed upon in the separation agreement to buy out the other owner’s share of property and/or to retire joint debts (if any), not to exceed 95% loan to value (LTV). An Agreement of Purchase will have to be prepared and accepted by both parties, and a full appraisal is required since the purchase transaction is non-arms length.
To refinance your mortgage today to your advantage, contact a mortgage professional at Homefund or simply APPLY ONLINE NOW with no obligation whatsoever.
Closing Costs related to Refinancing:
The regular costs related to the refinancing process are: appraisal ($200-$350), legal fees & disbursements ($700-$1000), title insurance if survey not available ($250-400), and any discharge penalties if considering to break the current mortgage. Although we can estimate these for you, please remember that only your lender can provide the exact penalty amount.
At various times, there are a number of promotions that lenders and Homefund run that could provide credit for the appraisal cost and legals fees. We will inform you of any such promotions at the time of your application.
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