Imagine you can transform your mortgage into a better and more freeing financial instrument, borrow at lower rates, or tap into the equity in your house. That is what a refinance mortgage can do. Refinancing a mortgage is like the reset button for your home loan, and you can replace your current mortgage with a better one that suits your financial goals better. Let us examine the advantages and costs of mortgage refinancing in Canada.

Basics of Mortgage Refinance

A mortgage refinance is the procedure of replacing a current loan with a new one, typically to assess the value of a property or to enjoy more favourable terms. Refinancing involves the purchase of a new loan to repay your existing loan, as well as the possibility of a longer loan duration, a lower interest rate, or a different form of mortgage. 

Refinancing a Mortgage: The Average Cost

Refinancing a mortgage involves the payment of the loan servicing fees associated with the original mortgage. The cost of refinancing varies depending on your situation, but the average cost is between 2% and 6% of the loan amount.

Here is a breakdown of the costs associated with refinancing:

Application fees: Up to $500

Origination fee: $300 - $500

Recording fee: $25 - $250, depending on location

Appraisal fee: $300 - $500

Credit check fee: $25

Title services: $300 - $2000

Attorney fee: $500 - $1000

Benefits of Refinancing a Mortgage

Still thinking if you should refinance? There are multiple reasons you may want to refinance your mortgage. Take a look at these top benefits:

Reduce Your Interest Rate

A loan with a lower mortgage rate lowers your monthly mortgage payment and lifetime interest expense. If your credit history has been boosted since you obtained your current loan, you may be qualified to refinance and receive a lower rate.

Modify the Loan's Terms

You can extend your mortgage term to receive a lower monthly payment or pay it off sooner with a shorter term. If you are able to afford a significantly higher monthly payment, refinancing from a 30-year loan to a 15-year mortgage can secure a lower rate and reduce interest costs. 

Utilise Your Home Equity

A cash-out refinance may enable you to enhance your loan conditions while utilising your accessible home equity. You will obtain a new mortgage for a more significant sum than the present debt and use the excess cash to achieve other financial objectives, such as renovating your property or spending for college. 

Conclusion

As previously mentioned, mortgage refinancing can be advantageous for householders, as it allows them to capitalise on more favourable terms and access the equity in their property. However, it is essential to carefully assess the commercial mortgage rates in Canada associated with the refinancing process and discover whether the potential savings or benefits exceed them in the long term. 

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