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decision to refinance

How to make the decision to refinance your mortgage

Many home owners in Canada make the decision to refinance their mortgage at some point. The question is, how are you supposed to know whether that is the right move? If you aren’t a mortgage expert, it’s easy to feel confused about the market, and lost in your options. There are some key factors you need to consider before committing to a refinance. Here are the big things to look out for!

Take a look at your income and employment

Before you can make the decision to refinance, you should make sure you are a strong candidate for this process. When you got your mortgage approval, you likely remember the process your lender went through to check your financial situation and creditworthiness. When you refinance, your lender will need to verify this information again to confirm their willingness to finance it. Your income and employment will be big factors here. It’s best if you have had consistent employment for a while, maintaining the same role and salary to show job security. This reassures your lender that your finances are in a strong spot and can support a refinance. 

Think about the changes you want

You shouldn’t refinance your mortgage just for the sake of it. This is a process that takes a bit of time and commitment, so there’s no point if you don’t have a specific reason. People choose to refinance so they can make some kind of amendment to their current mortgage term. For example, you may be looking to switch between a fixed and variable rate product. You might want to access home equity in order to complete home renovations, or maybe you want to shorten or lengthen your amortization period. There are many things you can do with a refinance to make changes to your mortgage product. It’s important to ensure that what you want, you can achieve with a refinance.

Weigh the pros and cons

The decision to refinance comes with advantages and disadvantages, just like any other mortgage decision. Before you commit, you should take the time to weigh these factors. We mentioned most of the main advantages of a refinance above. You may be able to find a lower interest rate, which will allow you to save money each month with smaller payments. You might expand your payment options by securing the ability to make prepayments, or to pay off your mortgage early. Finally, a refinance allows you to access your home equity if you are in need of cash flow.

However, the big drawback of a refinance is it involves breaking your current mortgage term. This will cost you a penalty, and you need to ensure the refinance is worth this expense. If the goal of refinancing is to save money, there’s no point if the penalty to exit your current term will outweigh those savings. You can calculate how much you might be looking at in terms of costs and savings before you decide whether this is the right move for you. That’s where a broker comes into the picture!

Speak with a broker first!

The best thing you can do before you decide to refinance is consult a mortgage broker. Refinances can definitely be confusing, and you don’t want to make a decision that sets you back on your homeownership journey. When you meet with a broker, you can discuss your current situation, as well as your future goals. Your broker will help you determine what the best course of action is, whether that is a refinance or not. There is no downside to speaking with a broker first. You will get detailed and accurate information, and you will have a professional on your side ready to help you secure the best product. 

If you think you might like to refinance your mortgage, we encourage you to get in touch with a broker early. This ensures you can access the best advice immediately, so you can make the best decision for your mortgage. Seeking out the guidance of a mortgage professional is always a great first step on the path to a successful mortgage experience!

If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.