| There
are many reasons why you might want to refinance, or increase,
your existing mortgage — to consolidate non-mortgage debt,
to finance improvements to your home, etc. Let me help you
negotiate with your existing lender or switch to a new lender
who will give you a more favourable rate. There are many factors
to consider when refinancing your mortgage. Here's what you
need to know:
Taking
out equity in your home
Consolidating existing financing
Consolidate
other debt
Most unsecured debt is priced by your bank at a higher rate
than your mortgage in order to compensate them for the higher
risk of loss if you default. For many people it only makes
sense to use available home equity to pay out this debt,
as it typically reduces interest costs significantly. If
the total of the existing mortgage and the debt to be refinanced
is less than 75% of the value of your home, and you qualify
in terms of income and credit standing, refinancing your
first mortgage should be a breeze.
In fact, using an Invis Mortgage Consultant is the perfect
way to achieve this consolidation.
Renovations
& home improvements
If
you want to spend a significant amount of money on improving
your home, you may be able to take out a lot more equity
than you realized! I can advise you through this process.
Both insurers — GE Capital and CMHC, will insure new mortgages
which are "topped up" for this purpose, and the total of
your current mortgage and the new funds exceeds 75% of the
current home value. Not all improvements are eligible, however.
Pools and spas are typical "over-improvements" which may
not qualify for a high-ratio equity take-out. Of course,
if the total requirement is less than 75% of your home's
current value, you should have little trouble getting the
"top up" you need — regardless of the degree of luxury you
plan to add.
Combining
existing mortgages
Where the combined mortgages result in one "high ratio"
mortgage: If neither (or none) of the mortgages you're combining
was ever insured, but combining them results in a high-ratio
situation, you'll be required to pay an insurance premium.
You need to look closely at the total savings the combination
will give you, in order to determine whether this is financially
worthwhile.
Where the combined mortgages result in a new "conventional"
mortgage:
High ratio insurance is not required. As long as you qualify
with your income and credit standing, I will help you achieve
this quickly and conveniently.
In both cases there is one critical consideration which
causes the failure of many such refinances. The new mortgage
often requires a fraction of the cash flow previously needed
to service the now consolidated debt. Many who go through
this process not only absorb the cash flow savings into
an improved lifestyle — they either re-incur debt that they
paid out, or incur debt for which they now qualify — or
both. It is important to approach such a consolidation/re-combination
of obligations with the clear and focused goal of applying
all savings toward paying down the mortgage. Otherwise,
the new mortgage will be a burden, rather than a solution.
Breaking
a closed mortgage to transfer to a new lender
Many closed mortgages have the feature that allows the balance
to be paid out with a penalty after a certain time has elapsed
on the mortgage. Check the "prepayment" clause in your mortgage
to determine your own situation, or better still, call your
institution and ask them the cost of paying out in full.
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