What You Have to Know About Refinancing Your Mortgage

Refinancing your mortgage is a major financial decision that is best made when you fully understand what you are getting yourself into. Know that although mortgage refinancing is quite common, the outcome and benefits will not be the same for everyone because of various factor that have to be considered. Below are some of the most important things you have to know before refinancing your mortgage.

What is Mortgage Refinancing?

Mortgage refinancing means getting a new loan on a home with a new set of terms. Most people choose a mortgage refinance to get a better interest rate or to change a loan’s length of payment in order to save money. Some choose refinancing to free up some cash that can be funneled elsewhere.

What You Have to Know About Refinancing Your Mortgage

Refinancing to a shorter term will mean getting done with a loan sooner although doing so will result in higher monthly payments. A shorter term also means paying less interest overall, thus saving money. Some homeowners may choose to refinance to a longer-term loan to have lower monthly payments which will allow them to allocate the money to other necessities or financial projects.

Mortgage refinancing is a decision that should not be made lightly. It is meant to improve your current financial situation and help you plan for the long-term. You need to consider your current home’s value, your current mortgage size, the terms of the new mortgage that you’re taking out, your current interest rate, the possible new interest rate, and closing costs plus fees. You have to make sure that any fees you pay will not cost you more in terms of long-term benefits.

When to Refinance?

Your credit score as well as other factors may have changed a lot since the time you first took out a mortgage. This means that you may now be eligible for better interest rates which can save you quite a sizable sum over the remaining years of payment. Aside from wanting to change the length of your mortgage to save money, you may also want to refinance to switch to a fixed-rate mortgage from an adjustable-rate mortgage which will then give you better control over your finances.

With the above said, refinancing is not for everyone. If your home equity is below 20% or if your credit score has gotten worse, you may not qualify for a mortgage refinance. The same is true if you’re planning to sell your house soon or if you’re going through a severe financial difficulty at present time. It is best to find the perfect timing before refinancing your mortgage so that you can be sure that you’ll be able to abide by the new terms.

Overall, your entire financial situation will have to be assessed before you go for refinancing your mortgage. Our mortgage professionals can help you determine whether refinancing your mortgage is the best choice for your situation. Contact us today to schedule a consultation!

 

Everything You Need for Mortgage Refinancing Checklist

So we’ve talked about mortgage refinancing, but here we’re going to go over a quick checklist you’ll need when you come speak with one of our Toronto mortgage brokers. If there are any special documents you need aside from these we’ll let you know – but this list will about cover it. While a few things won’t apply to you, it’s important to read over the whole list! Don’t skip it! Read it right now! Before it’s gone forever – well no not really, but you get the point.

  • Photo or Picture ID – You need a way of proving that you are you. It’s better that the bank is paranoid about proving that you’re you and not some identity thief intent on stealing all of your equity with you none of the wiser. Passports, driver’s licenses, ID cards, anything generally issued by the government will help you establish your identity to a prospective lender.
  • Proof of Income – What do you do for a living? Self employed? Using your business to prove that you’ve got some kind of income rolling in? Paystubs? All of these things will help show that you have an income to pay your mortgage.
  • Bank Statements (Private and Business) – You’ll need bank statements for the last 3 to 6 months (farther back the better) to show that you have money in your account.
  • Divorce or Marriage Documents – Are you receiving alimony, child support from a divorce? You’ll need to bring in your divorce decree. Have you married since your mortgage started and you need to show that you have another income in your household that you want considered as your own? Bring your marriage documents with you.
  • Mortgage Documents – The loan origination document is VERY handy to have. You’ll also want to bring in statements (the most recent is best) from the current mortgage lender to show that you’re current with your payments. Don’t leave home without these if you have them, especially the most recent statement.
  • Tax Forms for 2 Years Prior – Showing proof of your income with your taxes is the best way to go about it. If you want your business income to be considered also bring tax returns for your business too.
  • Utility Bill – Most lenders are going to want proof that THIS is your home. A utility bill usually suffices to prove that this isn’t another mortgage refinancing on a rental property.

There are other things you might need to bring – but you’ll find these out when you schedule an appointment with one of our Canada mortgage brokers. Remember that each lender will be different and their criteria can range widely! Some won’t care if you’re refinancing a rental property or that you don’t have a utility bill. Others won’t care if you bring in information to prove that you and your partner live together. It all ranges wildly from one lender to the next, but when you work with us you’ll find out what you need to know.

Learn more about our great rates for mortgage refinancing here!