Should you refinance your mortgage? The why and when explained.

Mortgage Refinance Basics

I have asked you to shop around for the lowest mortgage rates possible when your mortgage comes up for renewal through a Calgary mortgage broker.  I just want to make it clear that finding the best mortgage rates possible are not just for when it comes up for renewal.  A great Calgary Mortgage broker will email you when the rates have decreased, or a better product is available and at the very least review your product every year on your behalf to ensure the fit is still perfect as possible.  Still I feel that some more information should be given on this subject. 


Mortgage refinancing can be done at the time of renewal or any time throughout your term.  If you do decide to switch and not just renew your product it’s called refinancing.  All it really means is leaving your current deal or institution for something new.  You don’t always have to leave the bank you are at, but it all boils down to how much you are going to save on mortgage rates if you do.  There might be legal fees, and a penalty associated with the change, but I will tell you know why there are good reasons to do just that.   Is there a benefit that outweighs this cost is the underlying question in all the reason below.

• Take equity (capital) out of your home. 

You can borrow up to 85% of the value of your home after you deduct the amount of your current mortgage.  This money can be used to renovate your home, or even purchase a second property.  Many people to avoid refinancing all together will use a home equity line of credit to access up to 80% of the value. 

• Pay off debt more expensive debt

If you are carrying balances at almost 20% on your credit cards, you are spending a little more than you could if you paid these balances of their your equity of your home.  Paying less interest frees up money in your budget to pay down the mortgage faster, or save for your retirement or even towards some renovations.   

• Lock in your Mortgage 

Did you know that today’s best 10 year rate is within one percentage of the best 5 year rate?  If you are in a variable the cost associated with rate changes with alter your payment and could give you anxiety attacks when doing your budget.  Do you know what would happen to your payment if it goes up 2%?  How about 3%?   If this prospect is worrying you then you might consider refinancing your mortgage to lock into a fixed rate.    

• Benefit from the lowest mortgage rates available

If you current mortgage rate is much higher than today’s rates, than you could be saving each an every month.  Before you jump ship and think, my rate could be better lets refinance.  There is a catch that you have to figure out first.  What is the penalty?   If it’s a variable rate product, the penalty is just three months’ interest. If you have a fixed rate, you’ll pay the greater of three months’ interest or the interest rate differential, or in some cases its 3% of the value of the mortgage.  A couple of the mortgage products out there right now are giving penalties which offset the lowest rates on the market.  This is why you should not just shop a rate, but the products itself.  The fact remains that if the rates are lower that what you have now, just ask a Calgary mortgage broker to determine if it’s a wise move, or it’s better to stay where you are at for now.

• Shorten your amortization period

Some clients want debts paid off as fast as possible.  If you are no longer happy with the prepayment privileges of your mortgage and still want to pay it off sooner, you can reduced the amortization of your mortgage allowing you to make higher payments on a monthly basis and paying it off faster.  Amortization is not the term of the mortgage but the whole time frame of the mortgage like 25 or 30 years.

If you would like for a Calgary Mortgage broker to have a look and see if the lowest mortgage rates available on the market would save you money don't for a second hesitate to contact one today!