A Smart Way To Refinance Your Home Loan In Canada
Should you refinance your mortgage? Big question.
The chase for a lower interest rate shouldn’t be your only reason to refinance your mortgage in Canada. There are several other reasons, starting with the possibility of getting a lower interest rate.
For instance, you could opt for refinancing your mortgage to access the equity in your home (by applying for home equity line of credit). Or you could refinance to consolidate your debt (at a much lower rate), and maybe even swap to a variable or fixed rate.
The good news? The time is ripe for refinancing mortgages in Canada (if you wanted to). The rate of home ownership in Canada has risen since the early 1990s and, by 2006, was approaching the level in the United States.
Historically, in Canada, the rates on five-year fixed mortgages never dropped below 2%. At the moment (as on August 2020), the rates are at an all-time low at 1.89% — a rare opportunity for home owners to save hundreds of dollars on your monthly mortgage payments.
This translates to a possible tens of thousands off of the total mortgage costs for you. This is almost on the level of “absurdity” — the only other time we saw such low rates have been during the oil crisis in 2017.
The Bank of Canada (BOC) has also stated that the rates will remain low for a long time.
The Mortgage rates will go lower — going by several analysts — thanks to the Bank of Canada’s Policy, the competition in the lending market, other seasonal factors, and also the pandemic’s stunning impact on the economy.
If you act soon enough, you have the potential to save money even if you had your current mortgage for a year or two.
Timing The Market? Just Don’t
The Bank of Canada lowered its five-year conventional mortgage rate from 4.94 per cent to 4.79 per cent, the second rate cut since May this year.
Meanwhile, In B.C., the average home price in July was up 12.9 per cent from a year earlier to $770,810, according to the British Columbia Real Estate Association.
Do the math: paying a 2 per cent annual mortgage rate when the national average home price is increasing at rate of 5.4 per cent annually, according to June data from the Canadian Real Estate Association, is an incentive to buy or refinance now.
The pandemic shows no signs of slowing. As it drags on, the rates are only predicted to keep dropping (until demand picks up again). Add other pandemic-driven crisis and trends in Canada to the equation such as lower demand due to lower immigration numbers, AirBnB listings are back on the regular market as long-term rentals, demand and supply scenarios are different for everyone.
It’s impossible to predict how long any of these bargain rates will last. If you wanted to refinance your mortgage in Canada, but you choose to wait it out, you’d potentially lose out on major savings.
The solution? Don’t time it. Instead, freeze a low mortgage rate while you can.
Is Mortgage refinancing The Right Thing To Do For You?
Refinancing your mortgage isn’t bad: people refinance their mortgages in Canada for different reasons.
Just because Mortgage financing is popular (ever since the surge of refinancing in 2011) in Canada doesn’t automatically mean you should do it.
To each his or her own.
The first thing you should do is to check if refinancing your mortgage is the best possible option for you. The primary reason why refinancing is done in Canada is that you may want to take advantage of a lower interest rate, reduce monthly payments, and maybe even get access to more money.
That extra money could be used for personal reasons, renovating homes or kitchens, pay down higher forms of debt (say, credit cards), pay for other major purchases, and maybe even fund a child’s education.
Also, you should consider other costs of refinancing mortgages in Canada: legal fees ($700 to $1200); registration fees (approximately $70), discharge fee (around $400), and others. There’s also the prepayment penalty (for breaking your existing mortgage which could cost up to 4% of your total loan).
The rule is simple: the amount of money saved from refinancing your mortgage should be higher than all these associated costs.
If you want to feel more confident, get the information you need to make smart decisions, and lock in on the lowest rates possible, you could use a service such as The Financial Forum [https://www.thefinancialforum.ca] to find the best deals for your mortgage refinancing (among other things).
About The Financial Forum
Founded in 1984, The Financial Forum is Canada’s most trusted portal for the lowest mortgage rates in Canada with several different pre-packaged mortgage products, depending on what you are looking for.
Headquartered in Vaughan (Woodbridge), Ontario — The Financial Forum is backed by a team of experienced professionals and is a reliable resource for mortgage financial consulting, mortgage products and services, not to mention customized world-class consulting.
Grab the best value for the money mortgage lending solutions specializing in residential, investment property, recreational property, lines of credit as well as first and second mortgages.
Save time. Save money. Get help with your mortgage now.