Your mortgage is not locked-in for life. If you want lower rates or re-adjust your loan based on your current equity or consolidate your debts, then feel free to refinance your loan. Right now, you can access up to 80% of your home value for refinance.

Why Refinance?

Reason #1 Get lower interest rates

You don’t have to worry about penalties if you are to break the existing contract; specially if lowering the rates will save you money in the long run. It all depends on the size of your outstanding loan and the penalties it will incur. First is to calculate the new rates. If you think it will work for you, then go for it. Usually, for variable rate mortgage, expect to pay a penalty equal to three months interest. Fixed rates on the other hand will incur greater than 3 months of interest or interest rate differential penalty (IRD).   

Reason #2 To access equity or cash from your home

The money you already paid for the home over time becomes your equity. If you need extra money for other investment opportunities, home repair or education, you can access at most 80% of your home’s value less the our mortgage balance. Tapping your equity comes in many ways, but may also mean breaking your contract and refinance.  

Reason #3: Consolidate all your other debts

You can cut-out high-interest debts if you are to consolidate your other debts such as car loans, credit card bills through refinancing. Check to see if you have enough equity to make this possible.

How Refinancing Works

1. Cancelling your mortgage contract early

You may need to look into what other lender offer. You can terminate your current mortgage early and start a fresh new computation with any lender.

2. Add a home equity line of credit

A home equity line of credit allows you access to the equity in your home at your own discretion. You can loan up to 80% of your home value (less outstanding balances); with the equity of the home as collateral, you shall be responsible to pay back the credit line with interest as well as the remaining balance of your mortgage. You can avail the home equity line of credit through your existing lender and a small subset of other lenders.

3. Blend and extend your existing mortgage

In time, your current lender may offer you to blend your current mortgage rate plus payables you have at market price. There is the convenience of just having one lender holding all your other loans,  you must also know that “blended rates” may be higher as compared to the competitive mortgage-only rates.  So make sure you do the math before you break your mortgage.

What does it take to refinance your mortgage?

The actual costs for you to refinance entirely depends on what methods to use to either access your equity or lower your interest rates. But regardless, you shall incur legal fees as lawyer services will be needed to change the mortgage details on your title. The nice thing is that if your mortgage balance is more than $200,000 many lenders will cover for this cost. In the same way, if you are to cancel your current mortgage contract halfway through your term, your lender will have to charge you with a prepayment penalty. For fixed rates, this penalty is usually more than three months of interest or the interest rate differential payment (IRD). Variable mortgage rates will only incur three months interest.


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