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Tips for Refinancing a Mortgage in Ontario

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Refinancing a mortgage in Ontario can be beneficial to homeowners in a number of ways. Whether it is to reduce your monthly payments, access equity for investments, or take advantage of newer, lower interest rates, refinancing comes with some pros and cons to take into consideration. In addition, with all the options offered today by banks and private lenders, consumers should be aware of the basics of refinancing first.
 

What Is Refinancing?

 
Refinancing is essentially getting a new mortgage to replace your original one. Most homeowners consider refinancing to attain a more favourable interest rate or term for their mortgage.
 

When Should I Consider Refinancing?

 
Borrowers may refinance their mortgage for a number of reasons, but the three primary motivators are to lower interest rates, reduce or lengthen their loan’s terms, or access trapped equity for investment purchases.
 
1. Lower Interest Rates
 
As you work your way up the career ladder and establish a strong credit rating, your ability to acquire loans at favourable interest rates increases. With a lower rate, homeowners will be able to spend more time paying off their principal loan rather than throwing money away at interest. Depending on the difference, you could save a considerable amount over your mortgage with just a simple adjustment to your interest rate.
 
2. Reduce or Lengthen Your Mortgage
 
Depending on your situation, refinancing can allow you to reduce or lengthen the term of your mortgage. If you are looking to lower your monthly payment to diminish the stress on your day-to-day budget, increasing the length of your mortgage term is a viable option. However, if you find yourself with increased income and looking to pay off your mortgage sooner, decreasing your term will allow you to pay off your mortgage sooner without penalties.
 
3. Cashing Out on Home’s Equity
 
As your home appreciates on the market, its value will increase over time. Many homeowners put additional funds into adding upgrades and improving their homes for future resale value. Refinancing your mortgage can allow you to access equity that is tied up in your home for major investments, such as a vacation property, home renovations, a child’s tuition, or paying off other debts such as credit cards.
 
Whenever you are dealing with real estate, timing can be everything. If you acquired your mortgage during a period of high interest rates and the market has settled down since, it may be a wise to look into current rates to see if there has been considerable change.
 

What Is the Cost of Refinancing a Mortgage?

 
Refinancing your mortgage isn’t quite as simple as it seems. You will need to cover costs such as an application fee, appraisals, legal fees and other closing costs similar to your original mortgage. There may also be penalties that come with obtaining a lower interest rate or altering your mortgage’s terms. It’s important to consider these costs before choosing to refinance a mortgage.
 
It is best to arrange a meeting with a financial advisor or mortgage specialist to determine if refinancing your mortgage in Ontario is the best route for your situation and needs. 

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