Mortgage It Right!

Kelleway Mortgage Architects

So you now have, or you previously had, a mortgage on a residential property.  At this time, you may be thinking about making changes to that mortgage or taking out a new mortgage.  Technically, refinancing means that you will first discharge a current mortgage and all registered encumbrances and then arrange a new mortgage.

Common reasons why you may want to refinance include:

1)  Mortgage Term Expiring.  The term of your current mortgage is due to expire within a few months.  The term is the length of time which a mortgage agreement covers; payments made may not repay the outstanding principal by the end of the term because of a longer amortization period.  An example is that you may be nearing the end of a 5-year mortgage term on a 25-year amortization period (i.e., when the full mortgage is paid out and you become the sole owner, not you and the lender.)  Before the mortgage term expires, you will usually need to refinance in order to pay the balance owing on the mortgage.

2)  Leveraging or Equity Take-out.  You may want to leverage your current equity in your property to invest in something else, such as purchasing another property or adding investments to your financial portfolio.  Or, if you are a business-for-self person, you may want to tap your residential property equity to grow your business.  Another reason to refinance is to cover the cost of home renovations that could increase the overall value of your property.

3)  Debt consolidation.  You believe your current consumer debt (e.g., credit card balance) is costing you too much interest and negatively affecting your monthly cashflow.  You may choose to refinance, pay out high-interest debt and consolidate your multiple payments into one lower-interest mortgage payment that better suits your monthly budget.

4)  Mortgage Market Changes.  It is not uncommon for Canadians to refinance their mortgages years before the end of their mortgage terms.  For example, the average 5-year mortgage rate in Canada since 1981 is 9.75%.  However, according to the Bank of Canada this average rate includes average highs such as an 18.15% in 1981 and average lows such as 5.48% in 2005.  Therefore, even if you have to pay an interest penalty to get out of your current mortgage agreement, you may still save a substantial amount of interest over the life of your mortgage by refinancing before your mortgage term expires.

5)  Personal Life Changes.  Life has its ups and downs.  You may win the lottery and want to become mortgage-free.  You could have  earned a promotion with a substantial salary increase and want to pay down your mortgage faster.  Your marital status and parental status may change.  Or, you or your spouse may need to curb spending or pay down debt due to a temporary loss of employment income, investment market loss or business downturn.  Do not be shy or embarrassed to call us to find out about refinancing - we will listen with an open mind and sympathetic ear before suggesting your best mortgage options.

Review before you Renew, you may want to Refinance with a different Lender

Times change and the mortgage commitment you originally signed with your current lender may not be the best for you now for a variety of reasons.

Before your mortgage term expires, your current mortgage lender will most likely send you a renewal agreement to extend the mortgage loan, possibly on revised terms as to the repayments of the principal or interest rate.  BE AWARE THAT THIS IS NOT AN AUTOMATIC PROCESS AND YOU ARE NOT OBLIGATED TO RENEW WITH THE SAME LENDER.  You are, however, obligated to fully repay your mortgage.

Our best advice is to let us at Kelleway Mortgage Architects review your mortgage commitment and renewal notice up to six months (or more) before the mortgage maturity or expiry date occurs.  If the lender is giving you a good deal on your renewal agreement and it fits with your current life circumstances and goals, we will advise you to stick with that lender - even if it means our foregoing a commission on your refinancing.  In doing so, we hope to keep lifelong clients coming back to us for trusted advice and future mortgage financing.  If, however, we believe we can get you a better mortgage deal that will save you time and money then we will advise you to refinance under a different mortgage product or with a different lender.  Either way, your refinancing decision will be an informed one - so why make it alone when we can help you mortgage it right!


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