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Mortgage refinancing can be a strategic move to lower monthly payments or access home equity.

In 2024, with interest rates having dropped by over 1% and lower-than-usual penalties from banks, there’s a unique opportunity to consider refinancing.

Today I’m going to help you figure out if it’s the right move for you?

Now, let’s dive in!

Refinancing means breaking your existing mortgage contract and replacing it with a new one that has updated terms and rates.

This process involves reassessment of your income, credit history, and a home appraisal, similar to applying for your first mortgage.

Refinancing can offer benefits such as lower interest rates or freeing up cash through equity takeout.

You might be wondering, “Should I refinance my mortgage in Canada?” 

Here are some key indicators:

• Interest Rates Have Dropped: If current mortgage rates are more than 1% lower than your current rate, and you have at least 2 years remaining on your current term, refinancing could save you thousands.  
• Lower Penalties for Breaking Your Mortgage: Refinancing when penalties are minimal ensures the savings outweigh the costs. We need to check your prepayment penalty.
• Need for Cash Flow: Refinancing allows you to access up to 80% of your home’s value as cash, which can be used for major expenses, consolidating debt, renovations or investments.
• Switching from Fixed to Variable Rate: If you’re currently on a fixed-rate mortgage and with rates predicted to continue to decrease, switching to a variable rate could lower your payments and provide more flexibility. Read more on fixed vs. variable rates.

Refinancing offers several advantages:

• Lower Monthly Payments: Refinancing to a lower interest rate can reduce your monthly mortgage payments significantly, increasing your cash flow.
• Shorten repayment Terms: Instead of reducing your payment, refinancing to a lower rate with the same payment terms could shave years off your mortgage faster.
• Accessing Home Equity: You can use the equity to fund renovations, education, or other investments. For more on this, visit our Mortgage Refinancing Guide.

While refinancing can be beneficial, there are potential drawbacks to consider:

• Prepayment Penalties: Breaking your current mortgage can come with penalties, especially for fixed-rate mortgages. These can be substantial, so it’s crucial to calculate if the savings outweigh these costs.
• Extended Amortization Periods: Refinancing for lower payments could mean extending your mortgage term, which adds years of interest payments and increases the overall cost of your mortgage. Check out our Amortization Extension Guide for more insights.
• Costs Involved: Budget for appraisal fees, legal fees, and title insurance when considering refinancing.

Refinancing isn’t always the best choice. Here are situations when it might be better to hold off:

• High Prepayment Penalties: If the penalty costs are too high, waiting until the end of your mortgage term may be wiser, or tracking your penalty for the right opportunity.
• Minimal Interest Rate Difference: Refinancing for a rate difference of less than 1% may not be worth the associated costs, especially if your current mortgage matures soon.
• Short-Term Plans: If you plan to sell your home soon, refinancing may not provide enough benefit to cover the expenses involved.

Refinancing can be a smart financial move when done under the right conditions.

Evaluating the current interest rates, penalties, and your financial needs will help determine if refinancing is the right step.

I’m here to help you determine if it aligns with your financial goals and can help you save money in the long run.

Let’s run the numbers!

Thinking of refinancing your mortgage? 

Contact me today to see if refinancing is the right option for you and how you can maximize your savings!