People refinance their mortgage for many different reasons. They might need some extra cash to pay off bills, or want to reduce their monthly payments.
Whatever your reasons are – here’s how you can get the best refinance mortgage rates:
Get youself ready:
One way to look at refinancing is to view it as buying your own home from yourself. In the process, you’re closing the old mortgage contract and creating a brand new mortgage – just like if you buy a new home. So when you go the lender, consider how they would view you as a potential buyer. They are going to look at your credit score and check if all your payments are up to date. And they’ll look at your income to make sure you can afford the new mortgage. They’ll check if anything has changed since you were last approved. Make sure your credit and financial life are in order to help you qualify for the best refinance mortgage rates.
Decide why you want to refinance:
Your lender is going to review your situation to try and determine why you are refinancing. They approved your original mortgage because they thought they would get their money back, with interest. Now they want to make sure it’s still a good decision for them to continue borrowing you money. The lender will have no problem giving you the best refinance mortgage rates if your reasons make sense, like if you want extra cash to build an addition to your home. Or if you want to consolidate some debt to take advantage of lower interest rates. But if your reason is that you’re having trouble keeping up financially and want to lower your monthly payments so you can buy a new sports car, well they probably wouldn’t like that. So take a good look at yourself from the lender’s perspective and ask yourself, would you borrow you money?
Apply for a new mortgage:
Once you have your financials in order, and can justify your reasons, you can confidently apply for a refinance mortgage. Your lender is in business to lend money. He wants to approve your application and give you the best refinance mortgage rates, so do everything you can to present yourself honestly and favourably to them. Your bank already approved you once, and as long as everything still looks good, they’ll have no problem approving you again.
Before you refinance, here are some other important things to consider:
Interest rate:
Refinance mortgage rates are the same as any other mortgage interest rates. Assuming your financial and credit situation has not deteriorated, the bank should still offer you the same rates as if you were buying a new home. If your financial and credit situation has deteriorated, however, you may be considered a riskier client to the bank and could be looking at higher interest rates. If your current mortgage is a fixed mortgage, you’ll want to check that the current interest rates aren’t too different from what they were originally. You might save money actually keeping your original mortgage.
Pre-payment penalties:
Depending on your original mortgage agreement, you may be subject to a pre-payment penalty for breaking the mortgage contract. This is included in the fine print of your original mortgage, so check into it before going too far. You may have to pay a large penalty and not come out any farther ahead. Often if you keep your refinance mortgage with the same lender they’ll waive the penalty (but check with them first).
Which lender do you choose?:
You don’t have to stick with the same lender when you refinance. If you find someone else offering excellent refinance mortgage rates, you might want to switch to save money. Talk to a Canadian mortgage broker to see who’s currently offering the best interest rates.