Mortgage refinancing is a popular tool among Canadian homeowners looking to save money on their home loan. If you’re considering refinancing your mortgage, there are a few important things to keep in mind. In this article, we’ll discuss what you need to know about mortgage refinancing in Canada.
First, it’s important to understand the basics of mortgage refinancing. When you refinance your mortgage, you’re essentially taking out a new loan to replace your current one. Your new loan will have a different interest rate, loan term, and other features. The goal of refinancing is to secure a lower interest rate, which can lower your monthly payments and save you money over the life of the loan.
Before you consider refinancing, it’s important to weigh the pros and cons. On the plus side, a lower interest rate can mean big savings over the life of your mortgage. However, refinancing also comes with some costs. You’ll have to pay closing costs, such as appraisal fees and legal fees, which can range from 1% to 5% of your loan amount.
It’s also important to consider the timing of your refinancing. Generally, it’s best to wait until you have a good credit score and a stable income before refinancing. This will help you secure the best mortgage rates and terms.
In addition, it’s important to know that the Canadian Mortgage and Housing Corporation (CMHC) has strict rules for mortgage refinancing. The loan-to-value ratio, which is the difference between the value of your home and the amount of your mortgage, must be at least 85%. If it’s not, you may not be eligible to refinance.
Finally, it’s important to shop around for the best mortgage rates. Make sure to compare rates from different lenders and compare the features of each loan. This will help you find the best deal for your situation.
Mortgage refinancing can be a great way to save money on your home loan. However, it’s important to understand the rules and regulations of refinancing in Canada before you take the plunge. Consider your financial situation, shop around for the best rates, and make sure you’re eligible for refinancing before you make a move.