Thinking of Using Your Home Equity or Refinancing Your Mortgage?

Do you want to change the terms of your mortgage or do you need money for a big purchase? If you’re on the fence about these, then you might also be wanting to know if it is better to use your home equity or to refinance your mortgage for funding. Read on below to help you make a better-informed decision.

Is It A Good Idea to Refinance My Mortgage?

Take a look at the interest rates. If they are currently lower than when you signed your mortgage, then refinancing might be a good idea now. You have to consider too that refinancing your mortgage means replacing your existing mortgage with another one with different terms. Your lender will calculate your new loan-to-value ratio to see if it is lower than 80% which is often the qualifying number. The lender will also look at your monthly debt payments in relation to income. They’ll ask for copies of recent pay stub, property tax bill, mortgage statement, notice of assessment, T4 slip, copies of recent assets or investments, savings accounts, and RRSPs.

Benefits of Refinancing

Getting a lower interest rate that will save you thousands of dollars over the years is the main benefit of refinancing. Another benefit is lower monthly payments. The cash that you can free up via cash-out refinance can be used to consolidate debt, invested for a venture, or saved as an emergency fund or money for higher education. Don’t forget that you may be able to change your mortgage type and other terms to help you achieve your financial goals faster.

Is it A Good Idea to Tap Home Equity?

Any payment that you make towards your mortgage will go into building your home equity. You can estimate your home equity by subtracting the amount you still owe from the current market value of your home. Once you have a certain percentage of home equity, you’ll be eligible to tap it using a home equity loan. Compared to other types of home loans, a home equity loan has a lower interest rate because it is a secured loan.

Benefits of a Home Equity Loan

A home equity loan will give you access to a substantial amount of cash that you can use to pay for home renovation, home improvement repairs, big purchases like a vehicle or an investment, and a lot more. You can also opt for a HELOC or a home equity line of credit if you think that you will have a series of smaller expenses in the near future.

Note that both refinancing your mortgage and getting a home equity loan will incur fees. You may need to pay for an appraisal, legal fees, and possibly, discharge fees as well as prepayment charges depending on a lot of details. If you have questions regarding the details of a home equity loan and mortgage refinance, do not hesitate to contact us at Mortgage Central Canada. We’re open at these trying times and happy to be of service to you.


Should You Apply for a Home Equity Loan or Is It Better to Refinance Your Mortgage?

Canadian homeowners have plenty of ways to access home equity although it can be tricky to choose which option is the best for their specific situation. It is not a secret that some individuals may face more difficulties or experience more limitations such as in the case of freelancers and other self-employed individuals. In general, people with non-regular income sources will have more difficulty securing mortgages and other loans.

Challenging Choices for Borrowers

The Canadian Government introduced the mortgage ‘stress test’ just a year ago and Canadians are having a more challenging time borrowing money with good interest rates since it was implemented. The mortgage stress test made things more favourable for lenders by increasing profits and decreasing risks but since borrowers have been having a harder time, they’ve been looking at more financial options to help them manage existing debt. This is a huge factor as to why the different types of home equity loans are becoming more popular although some people have voiced that that the many ways to access home equity is still a bit confusing for them and they aren’t sure which to apply for. The different home equity loans do have their pros and cons and what may work for one family may create more problems for another. This is why it is important to fully assess your specific situation with Canadian mortgage professionals before deciding which option to apply for to ensure that your financial goals will be met and so that you can avoid possible pitfalls.

Why Consult a Mortgage Professional for Your Questions?

A mortgage professional is a person who is abreast with the best and latest practices when it comes to mortgages and using your home equity. They can explain things to you in a manner that you will understand better. They will work with you to guide in making ethical financial decisions as a homeowner so that you can achieve your long-term financial goals faster and with more efficiency. Be prepared to answer a lot of questions because your answers to their questions is their way of assessing your financial needs for them to pinpoint the best options for you. Typical questions may be about your time frame for borrowing, how much you want to borrow, what are the terms for your existing loans or mortgage, and qualification criteria for loans and mortgages.

Refinance Your Mortgage or Get a Home Equity Loan?

Your truthful answer to the possible questions will determine if your situation will benefit more from a home equity loan or from a mortgage refinance. Note that each detail you provide counts in creating a solid approach that helps you get the cash you need now using a way that you will be capable of paying off later. This way, you can get out of debt faster.

Do you need a mortgage professional to help you decide between a home equity loan and a mortgage refinance? Talk to us at Mortgage Central Canada and we will answer the questions you have to empower you with the information you need. Discuss your borrowing options with us today!


Is It Worth it to Refinance Mortgage for Debt Consolidation?

Debt consolidation has many benefits, one of which is avoiding paying huge interest rates. With debt consolidation, paying debt is made much easier because instead of having to remember paying a few bills each month, you’ll only have to remember paying one. With these said, is it worth it to refinance mortgage for you to consolidate debt?

Getting Out of Debt

Many Canadians are weighed down by debt. Almost everyone who isn’t from a privileged background has car payment loans, credit card debts, student loans, and many other kinds of debts. It is easy to forget one or to get buried in paying just the interest in an effort to stay afloat. The problem is, handling multiple high-interest loans is tricky and if your plan is to just keep paying the interest, the loan will still get larger over the course of a year. Debt consolidation is the way to go.

For a lot of people, debt consolidation means taking out another loan. Most debt consolidations loans still come with high interest although a bit lower than say, credit card interest. Homeowners have a chance to save up on interest by applying for secured home loans such as a home equity line of credit (a HELOC) or going for a mortgage refinance for debt consolidation.

How Does Debt Consolidation Work?

So, a quick backgrounder. Debt consolidation is a way of combining multiple high-interest loans into a single loan that should be easier to pay for the debtor. The debt consolidation loan is taken to pay all remaining balances on multiple loans, effectively closing the other debts.

The main advantages of debt consolidation are that the borrower gets to choose a single loan with a lower interest than having to deal with multiple debts and bills, and, saving a lot of time and money in the process if properly planned out and executed. In other words, debt consolidation is a good way to pay debt for individuals who have a reliable and steady income and want to make their monthly debt payments more manageable and affordable.

Is It Worth It to Refinance Mortgage for Debt Consolidation?

Refinancing mortgage for debt consolidation is a way to get a lower interest payment plan. Most credit card debts charge 15-30% interest per month, but a mortgage usually just charge around 5%. Even considering all the fees the process of getting a mortgage refinance will entail, it is still possible to save thousands of dollars this way. Note that a debt consolidation refinance typically involves resetting an existing mortgage at a lower rate at the present time. This frees up some equity or the homeowner can pull out some equity to pay other debts. Closing costs will usually be at around 1-5% of the total loan but this amount is still low if a debtor can end up saving between 10-20% in interest per month.

Is it worth it to refinance mortgage for debt consolidation? The short answer is YES! If you want a more detailed response or interested to know how this applies to your specific situation, do not hesitate to contact us. At Mortgage Central Canada, we’d be happy to assess how debt consolidation can help get you out of debt.


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!