What is Mortgage Refinancing?
Mortgage refinancing is a process of replacing the original mortgage on your property with a new mortgage, generally with different terms than the original mortgage.
In most cases, refinancing your mortgage will require finding a new lender who will pay off your current mortgage.
Mortgage refinancing can be beneficial in some situations but disadvantageous in other situations. Most property owners refinance their mortgage to improve the terms of their current mortgage agreement.
Why Mortgage Refinance?
There are many reasons people decide to refinance their existing mortgage, some of the reasons are to:
- Secure a lower interest rate;
- Obtain better mortgage terms;
- Shorten the mortgage amortization period which allows to pay off the mortgage faster;
- Access home equity for financing a property purchase, investments or any other reason;
- Consolidating debt (including credit cards) with lower rate mortgage;
- Home Renovations;
- Removing someone from the mortgage and/or title;
Mortgage refinancing has its advantages and disadvantages depending on its motive. It can be a great financial move if it reduces mortgage payments, shortens the term of your mortgage or helps building equity more quickly.
It can be a valuable instrument to decrease your debt, if used wisely. Therefore, it is important to evaluate your financial situation very carefully and compare the benefits and disadvantages of refinancing.
Keep in mind that costs associated with mortgage refinancing will be incurred, which you should take into consideration. These costs include, but are not limited to; appraisal fees, title search fees, legal fees, mortgage discharge fees, mortgage registration fees, and closing costs.
In addition, there are repayment penalty fees to be paid to your current lender for breaking the existing mortgage contract early.
Methods of Refinancing Your Mortgage
Below are a couple of options available to you when considering a mortgage refinancing. For more complex situations, our real estate lawyers can advise you with professional help and support.
1. Breaking your Existing Mortgage Contract Early
Before you break your mortgage contract, you need to understand the penalties that you will incur as a result of breaking your mortgage contract early.
An experienced real estate lawyer can help explain your contract in full detail and give you insight on how to save as much money as possible. A reason to break your mortgage contract early is to reduce your payment’s interest rates.
Please note that there will be a penalty fee associated with breaking a mortgage with your lender before the term ends. This fee will depend on a list of different variables from your lenders.
To find out if breaking your mortgage is beneficial for you, use the following link to calculate your mortgage penalty mortgage break penalty.
2. Home Equity Line of Credit
Adding a home equity line of credit can be beneficial for you if you need a source of income for the purchase of a new home, renovations, etc.
A home equity line of credit is a secure form of credit in which the lender uses your home as collateral.
Mortgage Refinancing Process
The mortgage refinancing process will vary depending on your current situation and the prospective lender. But the process may follow a series of steps as the following:
- Consider your financial situation and the reasons for refinance
- Apply for refinance with different lenders
- Compare loan offers
- Closing of your refinancing mortgage
Our Calgary Real Estate Lawyers Can Help
Our real estate lawyers are experienced and knowledgeable in assisting you with any form of real estate mortgage refinancing.
For further information about mortgage refinancing, please book a consultation with our lawyers online or call us at (403) 476 – 2011.
Other Types of Real Estate Law Services
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