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Mortgage Renewal VS Refinance

Do you have a mortgage that is renewing soon? If yes, the question you may be asking is ‘is renewing your mortgage the same as mortgage refinancing?’ The answer is no. Refinancing a mortgage is when you renegotiate the current loan agreement, whereas renewing a mortgage is when you sign new terms with your current lender for another term. Reviewing the benefits of a refinance vs renewal will help make a more informed choice.

As you review mortgage renewal vs finance Canada, you should note that refinancing attracts a penalty known as Interest Rate Differential. Some lenders will charge extra fees on top of the Interest Rate Differential. Our specialists will answer the question of can you refinance your mortgage at renewal and help with refinancing mortgage Canada. We will further help you know whether refinancing or renewal will be best for you. Contact us now to find out more.

What is a Mortgage Renewal?

After getting a mortgage with a lender, you will get into a contract that is valid for a specified period. This contract is known as the mortgage term. At the end of a mortgage term, you will need to renew your contract if the mortgage is not cleared. So what happens when you renew your mortgage?

If your current mortgage contract is with federally regulated financial institutions like banks, the lender is required to provide a renewal statement 21 days before the end of the current term. The lender is also required to notify you 21 days before your mortgage term ends if you will not renew the mortgage.

A renewal statement includes the following:

  • Remaining principal or balance at the date of renewal.
  • Interest rate.
  • Payment frequency.
  • Fees or charges that apply.
  • The term.

It is a pretty straightforward process to renew mortgage Canada. If you still owe money to the lender, all the terms you negotiated and agreed to will stay the same. You will only be required to sign the renewed contract. A mortgage renewal is recommended if you are happy with the current mortgage terms, and research suggests you are getting the best value.

Brokers are not just helpful when applying for a new mortgage but also when you want a renewal. Your broker will explain how does mortgage renewal work in Canada and help you determine whether a renewal is better. The broker also makes you aware of the drawbacks of a renewal and discusses early renewal options and renewal problems. The broker will also answer the question of can you pay your mortgage at renewal?

Knowing what a mortgage renewal entails will help you be more confident in your choices as you renew your mortgage. Contact us for help.

What is a Mortgage Refinance?

Mortgages are a huge commitment; some last more than two decades. The best thing is that the mortgage you start with does not have to be the same one you finish with. This is all thanks to the option of refinancing mortgage Canada.

When you refinance a mortgage, you take a new mortgage to replace the current mortgage. The new mortgage can be the same amount as the current mortgage or be of a larger amount. When done properly, refinancing a mortgage can save you money. It is, however, crucial to understand how does refinancing a mortgage work before you get started.

What is a mortgage refinance?

A mortgage refinance allows you to end the current mortgage and start a new one. You can refinance with your current lender or with another lender. Refinancing a mortgage gives you the option of applying for new rates, changing the conditions and borrowing more cash.

Unlike a mortgage renewal that can only be done at the end of a mortgage term, you can do mortgage refinancing during or at the end of the current term. However, you should note that refinancing before the end of your current mortgage term will attract prepayment penalties. This is because you will be breaking your terms early.

If you need to make changes to the current rate, switch to another lender or access the equity in your home, a mortgage refinance is what you need. There a several reasons why you may want to refinance your mortgage:

  • Lower the rates. Refinancing enables you to apply for new mortgage rates.
  • Access equity in your home: When you refinance, you will be able to borrow against the equity you have built up in your home.
  • Consolidate debt: Refinancing enables you to consolidate multiple debts into your mortgage. You can borrow additional cash against your home’s equity and pay off other small loans with refinancing.

Can you refinance a mortgage in Canada? The answer is yes. Our team will advise you on your options and help you get the best terms. Contact us now to find out more.

Advantages and Disadvantages of Refinancing Your Mortgage

Refinancing a mortgage offers myriad rewards. The key advantages you get from choosing to refinance mortgage include:

  • Ability to consolidate your debts.
  • Lower mortgage rates.
  • Repair your credit.
  • Access more cash through the equity you have built in your commercial property or home.

A mortgage refinance is not without drawbacks. The two main disadvantages are:

  • Refinancing fees.
  • Penalties for breaking the mortgage early.

The advantages of refinancing far outweigh the disadvantages. To benefit the most from refinancing, it is highly recommended to work with a broker. Our team will evaluate all your options and guarantee you get the best terms.

Mortgage Renewal – What Your Renewal Statement Should be Like

If your mortgage is from federally regulated institutions, you will be provided with a renewal statement at least 21 days before the current term ends. Your lender is also required to give you a notice 21 days before the end of your term if you will not be renewing your mortgage. Paper statements or electronic statements will be provided depending on the communication method you prefer.

The renewal statement from your lender must include the following:

  • The balance or the remaining principal at the date of renewal.
  • Interest rate charged.
  • Payment frequency.
  • Term.
  • Feeds or charges that apply.

The renewal statement will also state that the interest rate that is offered will not increase until the renewal date. Some lenders will give you a mortgage renewal contract on the same day you receive the renewal statement. Always work with an experienced broker to better understand the mortgage renewal process.

Should You Renew Or Refinance Your Mortgage?

The decision to renew or refinance your mortgage requires serious consideration. Both options offer their share of benefits. As you compare mortgage, refinance vs renewal, the key benefit of a refinance is the ability to borrow more using the equity you have built-in your home and the ability to refinance at any time. The beauty of a renewal is the ability to continue enjoying the same terms you have always enjoyed.

As you evaluate mortgage renewal vs refinance Canada, you should note that the decision on whether to renew or refinance depends on what you have planned for the future. For example, if you need extra money to pay for renovations, refinancing will be ideal. On the other hand, if you want to continue with the current trajectory in mortgage repayment, a renewal will be great.

Can you refinance your mortgage at renewal? We are here to answer this question. Give us a call.

What is the Cost to Refinance Your Mortgage?

Determine Available Equity

Refinancing a mortgage enables you to get a lower interest rate or borrow more money based on the equity you have built in your home. While this can be a great financial solution, you have to think about the costs associated with refinancing a mortgage.

To refinance your mortgage, you have to know how much equity you have. Refinancing enables you to access up to 80% of the value of your home, minus the outstanding balance of the mortgage. Here is an example of how to determine available equity.

If your home is valued at $300,000 and you have an outstanding mortgage of $200,000, the available equity will be $40,000. Here is the formula:

$300,000 X 80% - $200,000 = $40,000

Home value Max loan-to-value ratio Max loan-to-value ratio Available Equity

Calculating the available equity will give you an idea on how much you can get. We can help.

Use Mortgage Refinance Calculator

You can refinance your mortgage within the term or at the end of the term. Refinancing within the term will make you get a lower amount on your home equity. This chart outlines the fees you will pay under refinancing. Use it to know how much your mortgage will cost.

Mortgage Prepayment Penalty

Refinancing within a mortgage term usually attracts a prepayment penalty. This is because you will be breaking your mortgage early. As a result, you have to pay mortgage prepayment penalty fees in addition to other fees. If yours is a fixed-rate mortgage, the prepayment penalty will be the greater of:

  • 3 months’ interest or
  • Interest rate differential (IRD)

For a variable rate mortgage, the prepayment penalty will be three months’ interest. You will not be charged a prepayment penalty if you refinance when your mortgage term is up for renewal. If you need more help on this, we are always happy to answer any questions you may have. Contact us today to find out more.

Mortgage Discharge Fee

When you want to switch to another lender, you will be required to pay a fee in order to discharge the mortgage from your current lender. Lenders set their own unique fee rates. All in all, the typical discharge fees range from $200 to $350. Take a look at the below chart to understand the varying discharge fees that are charged by different lenders across the country.

Mortgage Registration Fee

Irrespective of whether you are staying with the current lender or switching to another one, you will be charged a mortgage registration fee when refinancing. When refinancing your mortgage, the lender will need to remove the current mortgage amount from your property’s title and re-register it with the updated mortgage amount. A registration fee is charged, and the provincial government usually governs this. The fee is about $70.

Legal Fees

Before refinancing your mortgage, it is recommended to consult a real estate lawyer. The lawyer will review your mortgage loan and the associated terms and conditions. The lawyer also registers the new mortgage and completes a title search to ensure there are no leans made against the property. It is also the job of the lawyer to facilitate the whole financial transaction—the associated legal fees for refinancing a mortgage range from $700 to $1,000.

If you want to switch to another lender and your mortgage balance is more than $200,000, the new lender might pay the fees for you.

When It is Smart to Refinance Your Mortgage

Mortgage Refinance to Invest

Apart from investing in properties, some homeowners elect to refinance their mortgages to get lower interest rates. Today, it is quite common to see homeowners using funds from a mortgage refinance to invest in such investment tools as lending money for private mortgage investing. This method has proven to be very lucrative, thanks to the great returns it offers. Hence, the method is referred to as financial leveraging.

Financial leveraging is where you borrow money at a lower interest rate then lend it out to someone else at a higher interest rate. Naturally, you will earn more from lending out money at a higher interest rate, so you will make a profit when you pay off the borrowed money. Needless to say, financial leveraging is what the banking industry is built on and what bankers build their careers on.

Let’s take a quick look at an example of a leveraging financial plan using your available home equity. Assuming you can refinance an additional $100,000 in mortgage from the equity you have built on your home at a fixed rate of 2.74% on a five-year mortgage term period. You can invest the $100,000 in a private mortgage that offers a higher interest rate. The private mortgage loan can pay 10% interest. That means your gross profit will be 7.26%.

Home refinancing can include a Home Equity Line of Credit (HELOC). The HELOC credit line will be secured by your home and attracts a much higher interest rate. The best thing is that it is revolving, and you can use and payback as you wish irrespective of the interest rate.

To help you better understand how you can leverage on HELOC line to invest, let’s look at an example. If you have $100,000 HELOC at a rate of 3.95%, you can invest in a private mortgage loan at a rate of 10%. With this, you will earn 6.05% as gross profit.

The HELOC rates are variable and often differ from the mortgage rates. They are also dependent on several factors. We have a Mortgage Refinance Calculator that can help you better understand how much you will get in mortgage refinancing. Get in touch with us now to find out more. We are always happy to discuss your options and recommend the best solutions based on your needs.

Mortgage Refinancing to Renovate a Home

If you have ever tackled a home renovation project, you know how expensive these projects can be. Some people turn to home improvement store credit cards. The problem with this option is the interest rates are exorbitant. The best option is to make use of the equity available on your home or commercial property. If the home equity you have built is big enough, you will be able to get enough money to complete your renovation project. Needless to say, refinancing using your home equity attracts favourable interest rates than those on the store or personal credit cards.

Home renovations usually account for a large portion of home refinancing. When you apply for a home equity loan, you will be able to finance your home's renovation and even have enough money left for labour costs. Refinancing your mortgage is the most recommended home equity loan.

According to a 2019 news article, most renovations are done during the warmer months. Therefore, if you are planning an extensive renovation, you should give yourself at least a month for home refinancing if you have already been pre-qualified at a traditional institutional lender. However, if you plan on finding an alternative lender or private lender, you should set aside at least a week.

You must submit your applications early to avoid incurring large fees and unfair interests. If you are not able to qualify for refinancing from a traditional institutional lender, you should reach out to alternative lenders such as private lenders. Keep in mind that the interest rates from a private lender are usually much higher. As a result, private mortgages are usually viewed as a last resort or temporary solution. Most people take private mortgages for a term of 1 to 2 years.

Do you need help determining how much home equity you have? We can help. Our job is to help you find the lender that will accept your application and give you the most favourable terms as you refinance your mortgage. We are also happy to help you know how much you can get from refinancing your mortgage.

Mortgage Refinancing to Pay Off Student and Education Debt

Post-secondary education continues to become more expensive. As a result, homeowners are using mortgage refinancing to raise the money needed to pay for their kids’ college and university education. If you have education debts, refinancing your home will provide you with a great solution for paying back the education loans. All you need to do is know how much home equity you have before you refinance. Will the amount be enough?

Mortgage Refinance in the Event of a Divorce or Separation

When going through a divorce or a separation from a wife, husband, business partner or common-law partner, deciding how to allocate and split finances and assets can be hard. The process is also quite delicate. If your home or any other property is owned jointly and you have enough equity, a mortgage refinance can help simplify the division of assets and finances. You can apply for a mortgage refinance and use the money to buy out your partner or spouse. With this option, you will still maintain ownership of the property or get another co-owner.

Mortgage Refinancing to Have Money for a Down Payment For Another Purchase

Investing in real estate has been considered to be one of the best investments anybody can make. The main challenge, however, is getting the funds needed to buy real estate. Even when you plan on getting a mortgage to buy property, you will still need to raise a down payment. As you may have already experienced or read, raising enough money for a down payment is never easy. As a result, the required down payment is the main limiting factor for people planning on buying real estate in major Canadian cities like Toronto, Mississauga, Ottawa, Burlington, Oakville and the surrounding areas.

Mortgage refinancing has become a popular option when trying to buy additional property. As a result, more Canadians are using a mortgage refinance to get the money needed for down payment or deposit when buying additional properties.

The change in the banking system policy regulations makes it hard to get refinancing through a bank in Ontario. As a result, more people are using alternative lending solutions for their financing needs. If you are not sure where to start, you can always work with a mortgage broker. The broker will do the research for you and get you the best solution.

Mortgage Refinance to Improve Cash Flow Management

Life is full of ups and downs. At times, some of the downs cause us to experience financial challenges. This may be due to increased expenses, loss of a job and a range of other situations that may strain our cash flow. A single bad year can destabilize your finances for months or even years. The worst thing is it is hard to foresee situations that strain our finances. The impact is even worse when it hits during retirement. The good news is there are a couple of options you can use to improve your cash flow. One of the most popular ones is refinancing your mortgage.

If you own a home, the fastest way to improve your cash flow is to refinance. This is a great solution if you have built some equity in your home. A mortgage refinance will give you additional cash to alleviate cash flow management problems temporarily. You will have more time to do what is required to improve your financial situation.

Do you own a home or property? We can help you determine how much you will qualify for when you refinance your mortgage. Get in touch with us to find out more.

Mortgage Refinance to Lower Mortgage Rates

Thanks to the low rates, more and more Canadian property owners are choosing to refinance their properties in order to get lower mortgage rates. To help you better understand this point, let’s take a look at an example.

Let us assume you own a home, and the older first mortgage is $500,000 at a rate of 2%, and the second mortgage is $200,000 and charged at 8%. In this case, the total mortgage will be $700,000. The actual rate will be 2% multiplied by $500,000 plus 8% multiplied by $200,000. This gives a total of $26,000. When you divide 26,000 by 700,000, you get a combined interest rate of 3.71% on your $700,000 mortgage. The ability to refinance both mortgages with a 3% interest rate will save you $4,900 or 0.71% within a year. Needless to say, it is easier to service a single mortgage than it is to service two or more.

You have to go through your mortgage agreement before you refinance. This is because there are penalties charged for breaking the first mortgage early. Even so, the mortgage rates you qualify for after combining the first and second mortgage will help you save a lot of money.

A Seniors Reverse Mortgage Refinance for Retirement

Are you a homeowner over the age of 55? If yes, you may qualify for reverse mortgages. With the reverse mortgage, you will get a portion of your home’s available equity in cash. The best thing about this option is that you are not required to make monthly payments. You just need to continue living in your home. If your cash flow is strained during retirement years, a reverse mortgage will help you catch a break.

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Mortgage Renewal Tips Everyone Should Now

When happy with the terms of your mortgage, it is easy not to give thought to other possibilities. Prior to signing the mortgage renewal slip and sending it back, always take time to review your financial goals. You want to be certain your current mortgage provider will be able to offer the product that best suits your needs.

If your current mortgage term is a 5-year fixed rate, the renewal slip will most likely be an additional 5-year fixed rate. If you believe you will stay in your home that long, you can go ahead and sign. However, if you believe you might relocate to another city, you should opt for a product with a shorter term.

You should also think about how getting extra money can affect your mortgage prepayment options. For example, if you get an inheritance of a large sum of money, you can clear the mortgage at once. You should also think about refinancing your mortgage. Again, identifying your goals will help you make the best decisions.

Private Lenders Toronto

Even when the terms are favourable, you don’t have to renew your current mortgage with the current lender. If you find a lender with better conditions, you can move to them. All you need is to start shopping around for another lender early before your current term comes to an end.

Your current lender will send a renewal slip at least 21 days before the mortgage maturity date. This does not mean you start shopping for another lender when you get the renewal slip. You can start shopping around as early as 120 days before the end of the current term. You can find the maturity date in the mortgage contract then count back 120 days on the calendar.

Start by negotiating better terms with the current lender. If you don’t strike a good deal, you can start shopping around for another provider. It is, however, good to remember that you will not be able to switch to another provider until the actual renewal date. The best thing about starting the search early is that you or your mortgage broker will have ample time to find the best product on the market. Your paperwork will also be ready on time.

Ask for A Better Mortgage Rate

The details in the mortgage renewal slip make it easy for you to answer the question of whether to renew your mortgage or switch to another provider. Lenders understand that you are busy and thus provide an easy way for you to renew your mortgage using the renewal slip. In most cases, you will get a discount off the posted rate on the renewal slip. What most people fail to understand is that this is not the lowest discount they can offer. Moreover, you may get lower rates from other lenders.

Prior to signing the mortgage renewal slip, it is imperative that you negotiate with your current lender. It is always great to tell your lender about the offers you received from mortgage brokers or other financial institutions. This will show them that you know how much you can pay and that you are ready to move to another provider.

Assuming your mortgage matures in a month and you have agreed to a 5-year fixed rate of 2.74%, your current lender may offer a 0.25% discount off the posted rate, so you get a new rate of 4.89%. This means the monthly payments will be $1,953.60.

Shopping around can help you get a better rate for the same period. For example, you can secure a 5-year fixed rate of 2.94%. With this rate, monthly payments will be $1,652.13. This is more manageable since every month; you will end up saving $301.47.

If you don’t take action in a mortgage renewal, your mortgage term will be renewed automatically. This means you will continue getting the same interest rates and conditions. If the mortgage is renewed automatically, this fact will be stated in the mortgage renewal statement. Never shy away from negotiating with lenders.

Get a Rate Hold

Working with a mortgage broker is one of the best strategies you can use when shopping for a better mortgage rate. The mortgage broker has more connections and time to shop around. Working with a broker will also be better than going from one lender to the next on your own. Mortgage brokers are able to pull your credit report and compile a list of lenders that would be happy to take you in. The broker will also let you know how much interest rate you will be able to qualify for if you move to another lender.

With a broker, the process can happen fast, at times at the first appointment. Ask your mortgage broker for a rate hold if you want your current lender to match the rate you found. A rate hold protects you from interest rate increases for up to 120 days. If the interest rates go down during that period, you can negotiate for a lower rate. In addition, rate holds lock the rate if you are worried the rates will rise before time for renewal.

What if You Want to Change a Lender

There are three types of private mortgage lenders in Canada

Switching from the current mortgage lender to another ( refinancing mortgage Canada) can help you access better rates and better terms. Deciding on when to refinance a mortgage can, however, be hard. If you are wondering when you should switch, the answer is as early as possible. You need to start submitting mortgage applications early. Apply as though you are trying to get a new mortgage. You will be required to provide these documents:

  • Proof of income.
  • Copy of mortgage renewal letter.
  • Proof of property insurance.
  • Proof that you own a home.

Once you submit your application, it will take about one week for the mortgage broker to process the application. You should always leave time for this processing period and ensure everything will be ready before the mortgage period is up. If you are late, you may end up being forced to stick with the current lender for the next term.

There are charges for switching to another lender. They include a setup fee with your new lender, an appraisal fee to confirm your home's real value, and a range of other administration fees. Don’t hesitate to ask if the new lender will pay some of these costs.

If you’re wondering, “Is now a good time to refinance my mortgage in Canada?” Reach out to us for help.

Call us: +1 866 921 8890

Questions? We’re here to help!

FREQUENTLY ASKED QUESTIONS

Will my mortgage automatically renew at the end of my term?

Your lender will start reaching out to you about your mortgage renewal months in advance. Lenders mostly send you a renewal slip at least 21 days to the maturity date of your mortgage. However, it is possible for lenders to renew your mortgage automatically into a one-year open term if you don’t take action after receiving the renewal slip. In most cases, if the term will be renewed automatically, that information will be included in a statement with the renewal slip.

What if I wait until the last minute to renew?

Getting a mortgage term renewed is never easy. A busy lifestyle keeps most homeowners from getting back to the renewal. That is why lenders make it easy for you to renew. You simply sign and submit the renewal slip. However, if you don’t renew the mortgage before the maturity day, the mortgage might be renewed into a one-year open term. This term usually has a higher interest rate. It is thus wise to make time to renew before the maturity date.

How Can I Make the Most of My Mortgage Renewal?

A mortgage renewal offers a great opportunity for you to review your financial options. Regardless of what you are looking to achieve, our team is happy to help. We offer the fastest, easiest and most convenient way for you to renew your mortgage. We are also happy to advise you on refinancing options so that you can access some money using the equity you have built on your home.

Contact us today to speak with our knowledgeable and friendly mortgage advisors. We are always happy to hear from you and offer the assistance you need.

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Afton Jaskolski
2020-12-30

Getting a private mortgage was not easy to be honest, but at least with Mr. Leon it was doable. Thank you for your help!

Davin Mills
2020-12-26

There are a lot of mortgage brokers in toronto to choose from, I was a bit intimidated by that. Don't regret I picked CMB, they took the lead and made sure to cover all the bases

Tracy Wilhoite
2020-11-21

I was renting an apartment for a long time and finally decided to take a big step - get a mortgage instead. Team at certified Mortgage Brokers laid out various options for me. The actual process went smooth and quick, happy with my new home.

Ryder Turcotte
2020-11-16

My wife and I decided to refinance our mortgage and started looking for a mortgage broker in Toronto. There were so many options, so you can imagine how overwhelmed we got! After talking to Leon we decided to proceed with Certified, didn't regret that decision once. They always gave useful recommendations, were attentive, and constantly in touch. And most importantly (for us) they helped us to save some money!!

Lucy Zimmerman
2020-11-11

Vita was great. Helped my son with all the paperwork and got him very good interest rate. On the closing date called to follow up if everything went fine. Quite a pleasant experience. I would recommend this firm for anyone who is looking a mortgage broker.

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