What is a ‘Refinance’?

Refinancing is the process of obtaining a new mortgage to replace your existing mortgage while the purpose is to access equity in the home. Homeowners have the ability to access up to 80% of the equity in their home!

Why Refinance?

There are several reasons why someone may want to refinance their mortgage:

• Debt Consolidation (Pay off those high interest Credit Cards once and for all!)
• Home Renovations
• Large Purchases (House, tuition, etc.)
• Obtaining a lower interest rate/Converting from fixed to variable

A Refinance is paid as a lump sum to the home owner, allowing them to use the funds as planned. Often the lender will pay out the debts themselves to ensure they are actually paid.

Costs/Fees

When refinancing there are a few fees to be mindful of. If you are breaking your current mortgage, (ex. Have a 5 year mortgage term, and going to refinance at year 3) there will be penalties involved.
These penalties will be calculated based the type of rate you have. If you have a variable rate your penalties will be 3 months interest.
If you have a fixed rate your penalties will be the greater of 3 months interest or Interest Rate Differential (IRD).
Other costs often associated with refinancing are:

• Appraisal Cost
• Legal Fees

Most importantly, before breaking your mortgage, call your lender to determine the penalty of breaking your mortgage. This is important because you don’t want to loose money, we want you to get ahead- no stress, therefore sometimes it is better to wait. Contact your DLC mortgage agent today to discuss if a refinance is right for you.