What Is A Mortgage Refinance?

Refinancing your mortgage means you pay off your existing mortgage and replace it with another mortgage. Borrowers often refinance their mortgage for the following reasons:

1. To get a better interest rate. 
​2. To change the term of their mortgage (i.e. reduce the term or increase the term). 
3. Convert their rate to a fixed or variable rate mortgage. 
4. Tap into their property's equity to fund a project, down payment for another property or just access cash also known as “cash out refinance.” 

If you choose to refinance your mortgage, you will have to pay a mortgage prepayment penalty, legal fees to have your lawyer register your new mortgage on title to your property, and appraisal fees. 

Many people choose to refinance when interest rates drop really low. This is because over the long term, a lower interest rate will help them pay off their mortgage faster since their new mortgage payments will pay off more of the principal balance. 

Another reason people refinance is to pay off debt through consolidation. Consolidating high-interest debt into a low interest rate mortgage helps with cash flow since making minimum payments each month on credit cards, for example, without paying down the balance can become a huge drain on finances both in the short and long term.   You can access the equity in your home for debt consolidation and take on a very favourable monthly payment. 


If you can reduce your interest rate by at least 1.5% to 2%, then in most cases, it would be a good idea to refinance.

Some borrowers also refinance to extend their amortization period to 30 years. Extending your amortization period helps with cash flow because it makes your mortgage payments lower. 

If you want to explore a new mortgage loan for home renovations, debt consolidation, equity cash out, or to reorganize your mortgage by adding on a home equity line, please call or write today. 


Sarah A. Colucci
Sr. Mortgage Advisor
Mortgage Edge, FSCO #10680
Direct: (647) 773-4849
Email: sarah.colucci@mortgageedge.ca 

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