Should I refinance my home?
If you purchased your home more than two years ago or your house was a new-build and one of the following scenarios applies to you, you may be a great candidate for refinancing your home.
- Have high-interest debt
- Would like to lower your monthly bills
- Want a better interest rate
- Want to access cash for any reason at all – Personal reasons, renovations, investments, emergency fund, or to purchase another property.
- Want to remove somebody off your mortgage and title. Spouse/divorce, Co-signer, or anybody else.
- Coming up for renewal
Most of the money that Canadians have is in their home, refinancing allows you to access it at a cost-effective price. You can access up to 80% of the value of your home by refinancing and this allows you to achieve your financial goals much faster. Whether you’re looking to refinance your home to pay off your high-interest debts or looking to access equity to invest in your home or elsewhere, refinancing may save you thousands of dollars or provide you with an excellent return on your investment.
Refinance to consolidate debts and take out equity
The example below outlines how a real client refinanced his property to consolidate debts. This saved him thousands of dollars in interest, reduced his monthly bills by more than $2,500.00, and he was able to put more than $40,000.00 into his emergency fund.
Refinance to take out equity.
Refinancing your home can be an excellent way to fund a major renovation, purchase a second property, purchase a rental property, or simply access your cash.
This is an example of refinancing to access equity.
Value of your home: $600,000.00 refinanced at 80% loan-to-value.
Total Mortgage: $480,000.00
Pay off existing mortgage: $300,000.00
Approximate Lawyer Cost: $1,000.00
Approximate cash paid to you: $179,000.00
Monthly Payment: This will be based on your credit and overall application.
There are many different reasons to refinance your property so we couldn’t include
every scenario in this post. If you think that you may benefit from refinancing and would like
some additional information, please contact us now.
Should I work with a Mortgage Broker?
In the past, when there were a few options available, most people walked into their local bank to arrange a mortgage. They called their bank, scheduled an appointment, and brought their paperwork to the representative at the branch. The service that they received often wasn’t the best nor was the interest rate. The bank only offered them one type of product and interest rate and took a significant amount of time to even put an offer together. Due to how time-consuming the entire process was, most people just went through with it and didn’t visit another bank for a second opinion. There was a significant need in the market for better options and mortgage brokering as an industry took off.
When working with an established Mortgage Broker in Canada, you have access to more than 65 lenders with a wide variety of mortgage products. These lenders include large Canadian banks such as TD and Scotia but also countless other major lenders. Each lender has a few different mortgage products available, and a good Mortgage Broker will create a solution based on your needs and financial institution. With one application, you will have access to a wide variety of options and your Mortgage Broker will shop the market for you-saving you time and money.
Having access to many lenders and more mortgage options is great but one of the main reasons that people turn to Mortgage Brokers is service! Have you tried calling your bank lately? Were you able to get through to anybody? The answer is usually “no”. Purchasing a house is usually the biggest purchase any of us will make so being able to reach your mortgage professional is extremely important. The real estate market moves very quick, so it is imperative to work with somebody who is always available to you when you need them. The same logic also applies for refinancing. Your representative at the bank opens chequing accounts, credit cards, overdraft, RRSPs, and a wide range of products. They must know a little bit about a lot of different products which means that they cannot be an expert in any given field. If you were going to be flying to another country or city, who would you trust to get you to your destination? A part-time pilot that is also a hairstylist, bartender, and mechanic (Your bank rep) or a full-time airline pilot with years of flying experience (Mortgage Broker)? You may apply the same logic to securing your mortgage. I think the answer is clear.
The importance of having a solid pre-approval
It is common knowledge that you should never place an offer on a property if you haven’t been pre-approved. In fact, if you are working with a good realtor, one of the first questions they may ask you is if you have been pre-approved. Not all pre-approvals are equal and placing an offer on a property without a full pre-approval is outright dangerous.
A full pre-approval will answer some of the following questions.
- What is the maximum price I may offer on a property?
- How much of a down payment will I need?
- What will my monthly payments be?
- What will my interest rate be?
- What will I need to do to eventually purchase a home?
There is a lot of misinformation about pre-approvals and a lot of this stems from advertisements on TV and on the internet. Also, some Mortgage Brokers and bank representatives irresponsibly give you pre-approval amounts without much effort or due diligence.
What is NOT a full pre-approval?
- All the advertisements from our major banks which offer “60 second pre-approvals”. This is not a pre-approval and is not specific to your actual financial situation.
- You’re at a bank getting a new credit card and casually ask the representative how much you would qualify for, and they simply give you a new number.
- Submitting an online application to a bank or broker and they give you amounts without reviewing any documentation.
A full pre-approval with us includes the following.
- Phone call with a mortgage professional who assesses your financial situation and goals.
- Full mortgage application followed by a credit check and review.
- Review of all your supporting documentation. Income, down payment & other docs.
- Pre-approval sent to you within one business day of uploading your documents.
- A phone review of the pre-approval to go over the numbers that were sent in detail.
- Found a property that you want to make an offer on? We review the actual property to ensure that you can confidently make an offer.
Purchasing a home is a serious transaction that you should not take lightly, and your mortgage professional should not take lightly either. We have heard countless horror stories from people who purchased homes to only find out that their pre-approval was not properly completed. These people are then in a very stressful position and are often facing severe financial penalties and liability. Not only does a full pre-approval save you from potential financial hardship, it also makes for a pleasant experience once you do find a property. The extra effort we put into our pre-approvals means that you have a smooth closing and can focus on moving into your new home.
Not a first-time homebuyer and want to buy with 5% down?
I had a realtor partner ask about down payment options for First-time buyers vs buyers who already have a property and thought I'd create this post. This is an excellent question and there is a lot of confusion when it comes to down payment.
There is a common myth that you need 20% down if you currently own a home or have purchased a home in the past.
You can put as little as 5% down on a property if your intentions are to live in it. You MUST put 20% down if your intentions are to rent out the property that you are looking to purchase.
Example: You purchased a condo, lived in it, and now want to buy a house and rent your condo out. This is completely OK, and you can use as little as 5% down. You are upsizing and need more space; the lenders are assured that you will be occupying this new house.
If you currently live in a house that you own and are planning to rent it out and buy a condo to live in, you must have a good reason as to why you are downsizing. The lenders/insurers want to ensure that you will not be renting out the condo you are looking to purchase.
Example: You live in a house that you own but you need to move to another part of the city or country for work, education or to perhaps be closer to your family. You can put as little as 5% down because there is a good explanation.
If you currently live in a house that you own and are looking to buy a condo up the street with 5% down, the lenders/insurers will immediately think you are trying to use it as an investment property and will decline your deal. Again, if your intentions are to live in the property that you are purchasing, you can put as little as 5% down, no matter how many homes you have owned or own.
There are other instances where you can put as little as 5% down such as second homes that will not be rented out.
Example: Your children will be living there as they attend university.
Why is it important to speak to a Mortgage Broker? There are many factors when it comes to down payment so always speak to a Mortgage Broker. Also, every lender views rental income differently so having access to 65 lenders will ensure that you receive the highest purchasing power that is available.