mortgage refinance for home

What You Need to Know about Refinancing a Mortgage

CBC reported that mortgage rates have gone up. Some pundits are even encouraging people to try a fixed rate. In this case, why not try refinancing your mortgage.

Before searching for the best refinance rates in Ottawa, you should know the refinancing basics. This financing option might answer your monetary problems, so pay attention.

What Is Refinancing a Mortgage?

If you were to ask mortgage brokers, they would tell you that refinancing means you are starting a new loan and breaking your current one. This financing option allows you to change the features of your existing mortgage to suit your needs.

Refinancing a mortgage is a process that gives you a chance to improve the terms of your mortgage. This process can be done quickly at the end of your period. Mortgage brokers advise that you can borrow more if you have home equity.  

Refinancing your mortgage will also get you a better interest rate. If your previous mortgage has high-interest rates, you should look for a new financing option. You must know that refinancing is the most common way to get a lower interest rate.

Refinancing your home is also a good idea if you cannot pay your previous mortgage. You should not let a house go into foreclosure if you have a property. You have to do everything to save it.

Refinancing your home is a wise step to invest in home improvements. You can also use this financing option to buy a new car or consolidate some of your debts.

How Can I Refinance My Mortgage?

What is excellent about refinancing is that you can borrow up to a loan-to-value ratio of 90%. A loan-to-value ratio is your total loan amount divided by your house’s value.  
You will have a chance to get a lower interest rate, which is lower than your current interest rate. If you decide to refinance to consolidate other loans, you can do that.

On top of that, you might be required to pay the refinancing costs. Refinancing costs are used to pay the costs of preparing, processing, and completing the refinancing.

How Much Can I Borrow?

As mentioned earlier, you can borrow up to 90% of your loan-to-value. Let us discuss the following example:

Existing Mortgage: $150,000

Property Value: $200,000

In this illustration, the loan-to-value is 75%. Considering that refinancing allows you to borrow up to 90% of your loan-to-value, you can borrow $180,000, which is $200,000 times 90%. 

After which, we will deduct your mortgage balance from your refinance. You will get $30,000 since we deducted $150,000 from $180,000.

What Are the Fees?

When refinancing mortgages, you will have to pay various fees. These fees will be charged to you over your new mortgage term. These fees include:

  • Mortgage Breakage Penalty
  • Mortgage Discharge Fee
  • Appraisal and Inspection Fees
  • Mortgage Registration Fees
  • Legal Fees

Conclusion

Mortgage refinancing is an effective way to save money. It allows you to change the terms of your mortgage. You can also use this financing option to consolidate other debts. 

If you are looking for the best refinance rates in Ottawa, you should talk to Ottawa Mortgage Services. We can help with the refinancing of your mortgage with more flexible terms, so contact us now for the qualifications!