Refinancing your mortgage can be a tricky decision to make. How can you know it’s the right choice for you, or the right time? In fact, there are several reasons to refinance your mortgage, and depending on your situation, they are all valid. If you’re considering refinancing this spring, there are some benefits! 

It’s important to note that although the Bank of Canada has recently made increases to the target for the overnight rate, rates are still low across the country. This means refinancing your mortgage could still be a good option for you if it suits your situation. Here’s what you might be able to enjoy if you choose to refinance. 

Access equity for renovations

If you have any plans to do renovations or major home improvements, a refinance can benefit you. Refinancing can help you gain access to your home’s equity, which you can use to contribute to renovation projects. Spring is a popular time for renovations, so you might already be considering this move. You will need to have a good amount of equity built up that you can use to access cash for renovations, otherwise it may not be possible. Consider how long you want to stay in your home before refinancing to complete home renovations. You will be facing penalties for refinancing and breaking your current mortgage term early. If you move, say, one year later, and don’t take advantage of porting your mortgage, you may face additional penalties. Be sure to give some consideration to your future in your home before refinancing. 

Change your terms

The mortgage terms you agreed to five years ago might not fit you as well today. Our situations are always evolving, and our mortgages should reflect that. You might want to make a variety of changes, apart from trying to secure a lower interest rate. It’s possible you want to switch between a fixed-rate and variable-rate mortgage. While variable rates let you take advantage of low rates when they are present, borrowers also have to put up with rate increases. Fixed rates are less flexible but more predictable. Perhaps you want to shorten the length of the amortization of your mortgage. The longer your amortization, the more interest you pay. If you’re financially able to pay off your mortgage sooner, through bigger or more frequent payments, refinancing can save you money on interest. 

Consider a HELOC

A Home Equity Line of Credit (HELOC) is a product designed to give borrowers access to low-interest credit. HELOCs allow you to access up to 65 per cent of your home’s value in the form of revolving credit. Revolving credit means you can borrow and pay back money repeatedly, until you reach whatever the maximum amount allows. This secured credit has lower interest rates than regular unsecured loans, so you can use the money for anything you may need, like paying for outstanding school debts, car loans, or vacations. A secured loan means the lender uses your home to ensure you’ll make the required repayments, because your home is collateral. You should also note that this is not an option if a HELOC, combined with your remaining mortgage balance, exceeds 80 per cent of your home’s value. 

Need to consolidate your debt?

A lot of homeowners choose to refinance their mortgage so they can consolidate their debt. In September, Equifax confirmed Canadians had record high levels of mortgage debt, taking out new levels of loans to buy homes. Apart from mortgage payments, it’s not uncommon to struggle with other forms of debt, such as car loans and credit cards. Refinancing your mortgage to consolidate debt means rolling all your debts into one monthly payment, all with the same, often lower, interest rate. This helps you keep track of your payments, and the lower rate means you save money on interest. Remember, this doesn’t clear your debt for you! It just makes it easier to manage. 

If you think refinancing your mortgage this spring is a good idea for you, your first step should be to get in contact with a broker. Brokers can outline the pros and cons of refinancing, and help you decide whether or not it’s a good move for you right now. If so, brokers can also help you with the process from start to finish, including the search for the right product and lender.

If you’re interested in refinancing your mortgage, get in touch with me!