Mortgage refinancing is not a second mortgage, but it has the added benefit of allowing borrowers to increase the total amount of their mortgage under a new, single set of terms, or simply refinance the remaining amount of their mortgage with better terms.
When refinancing, mortgage brokers are most likely to take you to companies like Home Trust, Equitable Bank, and Canadian Western Bank, while a first mortgage with a major Canadian bank will often include a steep penalty if you need to refinance the mortgage early.
In these cases, this long-term debt is usually secured at a higher interest rate than your current mortgage. This long-term higher rate often means thousands of dollars in additional interest. And can be a much costlier alternative to a shorter-term loan alongside your current lower interest mortgage.
This is where the combination of flexible financing and expert advice you get from Cannect gives you the ideal mix of financing options to save you money.
You can choose to refinance at a great rate now if your mortgage is up for renewal, or if you’re looking to borrow more money today—months or years ahead of your mortgage renewing—get a CannectFlex loan to avoid a higher interest 2nd mortgage or additional fees for breaking your mortgage early.
Regardless of what your bank may have told you, it might not make sense to refinance your mortgage. Cannect will work through a cost benefit analysis of the factors that affect your decision.
Here are the key factors that impact whether or not it’s the right time for you to consider mortgage refinancing.
If you plan on paying back the borrowed funds within a year or two the costs to refinance a mortgage might not make sense.
The amount of time left on your existing mortgage will impact the penalty to break it. If your mortgage is with one of Canada’s big banks these penalties can be tens of thousands of dollars.
It is important to identify how borrowing more money will affect the interest rate on the entirety of your debt. If you have a low mortgage rate on the majority of your borrowings but need to increase the rate on all your debt just to add a small amount of money to your remaining mortgage amount, you could be adding tens of thousands of dollars of additional interest.
By leaving your first mortgage in place and borrowing a CannectFlex loan, you gain the time you need to improve your financial situation before applying for a lower cost refinance option when the timing is right.
Ali and Rebecca were looking for $150,000 to cover university and college costs for their graduating children and consolidate existing credit card debt.
They live in a $1,250,000 home and have a first mortgage with a major Canadian bank for $700,000.
With 1 year left on their mortgage, they thought refinancing would give them the best opportunity to increase their access to capital and lock in a rate at current interest rates.
Their bank offered them a rate at 1% higher than their current 5.99% mortgage rate. Securing this already higher rate 1 year before their mortgage renewal date was also going to cost them a penalty of $20,000. Just this 1% increase on their long-term debt would mean $200,000 in additional interest, plus the $20,000 penalty.
By calling Cannect, Ali and Rebecca were able to secure a CannectFlex loan for $150,000 with terms that matched their mortgage renewal date. With some of this debt paid down 1 year later, they were able to refinance their mortgage without penalty, combining the remaining amount of their CannectFlex loan with a new first mortgage at a more favourable 3% rate. This led to a savings of over $80,000.00.
Choose the option that best suits your needs, or call us at 416-766-2666 to review your home financing options.
You could take our word for it or take a look around and compare. Mortgage refinancing is offered by many companies and major Canadian banks. See how they compare, then come back and talk to us about how we can help you avoid penalties and credit damaging long-term debt.
Regardless of whether you have an existing mortgage (or two, or three) on your home—regardless of what your bank may have told you—Cannect will find the most effective way for you to borrow money.
Our goal is to provide you the best short-term loan solution for long-term value, so you can work towards the lowest possible interest-rate mortgage, without added fees or penalties and costly long-term debt.
Santino Agueci, Sutton Group