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How to refinance your mortgage?

by Pauline Paquin

 How to refinance your mortgage? Check out out refinance mortgage tips, with rates so low, it is worth trying to refinance your mortgage to pay less interest on it. Mortgage rates are at an historical low, it is time to take advantage of it. #mortgage #refinancemortgagetips #realestate #investments

I bought a three bed flat in 2009, with 25% down, and a mortgage at 2.94%. That rate was already amazing and I could have slept soundly in my new home without ever thinking about getting a cheaper mortgage. Until I found a little button on my online banking that was saying ”check out our mortgage range”. I was curious and the offers were addressed to me personally, with the option to change mortgage with just a few clicks!

I didn’t understand why the bank would do that, and offer me a cheaper mortgage, probably because of a time of high competition, but half an hour later, I had slashed my rate to 2.29%, with a $150 fee. I would make back the fee money in just a few short months.

Now without the help of my bank, how do you proceed to explore options and refinance your mortgage? Mortgage rates are at an historical low, it is time to take advantage of it.

Read your contract

Some mortgages will have penalties for leaving early, others are set for a couple of years or more. Set up a reminder in your agenda a month before your deal is up, and start looking for mortgage options.

Include all fees in your calculations

A refinance sounds attractive at first because you will get a lower interest rate on your mortgage, and reduce your monthly payments. But it generally comes with a plethora of administrative fees. Saving $10 per month in interest for a $1000 fee means it will take you more than 8 years to break even.

Consider shortening your term

I took a 30 years mortgage at first. With a lower rate, I could keep my payments the same and repay it a few years early. If your rate is going to be considerably lower, you may be able to afford repayments on a 15 years mortgage and save a lot more in interests.

How much will you save?

You can use a mortgage calculator to determine that easily. Depending on the duration of your loan and the interest rate, you can save a lot. For example, for a $200,000 mortgage at 3.5% over 20 years, a rate drop to 3% will save you more than $12000 in interest over the course of the loan, or $50 per month.

Keep your repayments the same and put those extra $50 towards your debt, and you can save an additional $4151, and pay it off 13 months sooner!

If you are unsure about the whole process, a mortgage broker can help you understand it all.

Post written by me and brought to you by mortgagerates.ca

Lovely comments

  1. We refinanced a couple of years ago, I wish it was as easy for us as a click of a button but our refinance includes pro-rating taxes, etc….we ended up back at our original mortgage amount. 🙁 But we are saving over $300 a month so I guess in the long run it turned out okay. 🙂

    • Good job! I love the flexibility of my bank and everything is calculated daily if I make an extra payment. I can even pay $1 extra if I want to. Having is so easy gives me not excuses not to repay.

  2. I am kind of addicted to refi’ing haha. Although I always recommend a no cost refi. Just like with the stock market you can never predict the bottom. 3 years ago people were saying rates couldn’t go any lower, 2 years ago same thing, etc. Now rates are still going down and I’ve done 2 no cost refi’s in that time period 🙂

  5. Interest rates are so important, but unfortunately you are at the whim of the market when you initially buy a house. Refinancing seems like a great option for those who have higher rates, especially since the rates are so low right now.

  6. Dear Pauline,
    I liked what you said about Now without the help of my bank, how do you proceed to explore options and refinance your mortgage? Mortgage rates are at an historical low, it is time to take advantage of it.
    Continue this kind of articles because they are very good and useful, congratulations.

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