Your Guide to Mortgage Refinancing in Canada

In simple terms, refinancing your mortgage is nothing but taking a new mortgage on your existing property. This new mortgage will close the current mortgage payment and start a new one afresh. Some of the critical options associated with refinancing are interest rates, term period, monthly payment structure, and loan amount. The interest rate can either be flexible or fixed, depending on the lender and the financial situation and affordability of the individual. 

The first step involved in refinancing the mortgage is determining the value of your home. The lender or expert should evaluate the home's current market value you are planning the refinancing. In most cases, the refinanced mortgage amount would be 80% of the property's market value. This particular sanctioned amount minus the existing mortgage repayment would be the resulting amount of the refinanced mortgage. The property owner can then use the equity amount left after this calculation for renovation purposes or even clearing out other debts.

To refinance your mortgage, you need to follow specific steps without fail, and those are the ones we are going to discuss in this section. All the particulars discussed below are for the mortgage re-financing rules and regulations framed by the concerned authorities in Canada. For better understanding, make sure to read through every single one of these procedures.

 Data collection - You need to possess data on all the financial activities performed in the financial year and the years before. Data corresponding to the current property value, current mortgage amount, annual income, credit score, etc., is also mandatory. Here is a list of different variables.

• Lender Discussion - When you plan to refinance your mortgage, make sure to discuss the whole process of refinancing with your existing lender or others who offer the same. This should provide helpful information regarding the entire refinancing procedure to the property owner.

• Application - A mortgage application needs to be filled with all the financial data we brushed upon earlier. Make sure to fill the application accurately, and one should be ready to face questions from the lender or broker regarding all the information mentioned in the application. You could even secure some expert advice to ensure that your goals align with the lender's interests, thereby helping smoothen the mortgage re-financing process.

• Pre-Approval Status - Once the application is successfully submitted with the lender or broker, the bank or the concerned authorities will provide a pre-approval mortgage quote. This will contain all the amount approved, interest rate, term, etc. If both parties are satisfied with the pace, time, and mortgage amount on offer, they can further be refinancing the mortgage.
• Full Mortgage Approval - If the individual applying for refinancing is happy with the terms of the pre-approval quote, then the broker or the lender would proceed further and sanction for full mortgage approval.

• Onboarding Queries - The process of refinancing a mortgage is not over yet. The lender would then ask for any queries the borrower might have on the whole process, terms, etc. Only when both parties are clear with all the refinancing agreement aspects shall we move on to the final agreement signature.

• Finalization - In this particular step, all the borrower's financial documents, property papers, etc., would be verified and brought to the agreement. Some records include property tax info, annual income info, employment particulars, etc. Few banks might even ask for an appraisal, which should be completed. Once the documentation is complete, the mortgage agreement is finalized, signed, and approved.

• Mortgage Payment Dispersal - During this process, the old loan is completed closed and the new mortgage is refinanced. In this case, all the payments in the previous mortgage would be complete and handled by a legal expert, like a lawyer. As discussed in the agreement, additional refinance payments to the borrower would be dispersed to the borrower via wire transfer or cheque. This particular payment will also be handled by legal authorities assigned to the whole mortgage refinancing process.

• Regular Lender Communication - Once the agreement signature process is complete, most borrowers seldom talk to their lenders or brokers, which is not the right approach. With time, the interest rates, regulations, financial status, terms and conditions of the mortgage, etc., will change, and to make sure that one doesn't miss out on the best offers, constant communication with the bank is a must.

• Some might find these steps to be a bit complicated, but they will become manageable once you start applying. For those who don't have the time to handle everything, there are a lot of reliable mortgage brokers who could guide you through the refinancing process quickly and efficiently.

Bottom Line

Mortgage re-financing is an excellent solution for lowering debts, lowering interest rates, and is a treat for property owners looking to renovate their homes. A line of credit might be a better option for some users when compared to refinancing. Refinancing is a better option for sure, but that doesn't make it the best pick for every property owner in Canada. Careful analysis of the market rate, term, trends, and current property value plays a crucial role in deciding whether the mortgage re-financing is good or bad for the borrower.

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