Many find the thought of refinancing their current mortgage just as daunting as their first mortgage. Thinking about the different rates, do I have an early repayment charge or even shopping around to find a better deal with a different lender. In this blog, we are hoping to help answer those questions that may be buzzing around your head in regards to refinancing your home.
Is there always a penalty for switching to a different lender?
No, not necessarily if you are switching mortgage lenders within your renewal date, you should not be subject to any penalties. If you do decide to change lender before the renewal date, you may have to pay the penalty; this should be on your annual mortgage statement. It can also be dependent on the type of mortgage that you currently hold. If you have taken out a closed mortgage, you will most likely be subject to a charge. If you have an open mortgage, then there isn’t usually a charge.
Should I opt for an open mortgage?
Sometimes open mortgage is the better options as they provide more flexibility in overpayments. An open mortgage gives you the opportunity to pay off your mortgage faster or in its entirety if you wish.
What is a closed mortgage?
You will find that most closed mortgages do have pre-payment limits which means you are only allowed to pay the agreed monthly amount. If you want to make overpayments more than 15%, you will usually be subject to fees.
How does a fixed rate mortgage work?
It is when the interest rate is fixed in the agreement that you have made with your lender over the agreed term of the mortgage.
What is a variable interest rate mortgage?
This mortgage option is when the rates will change throughout the mortgage term due to prime-lending rates.
My interest rates keep increasing, should I convert to a fixed rate?
It’s not uncommon to see your interest rates rising; there are various reasons that this may happen. An example of this is a heated economy. You will find that these interest rises are short-lived, however, if it persists then changing to a fixed rate could be an option for you.
Is the mortgage lender obligated to renew my mortgage when the term has ended?
Your mortgage does not automatically renew, and your current lender has no obligation to refinance your mortgage. You will usually receive a call from your current lender to see if you would like to renew as your term is coming to an end.
Do Canadian mortgage lenders charge a renewal fee?
The majority of Canadian banks will usually waiver the renewal fee. You may find that some lenders will attempt to charge a renewal fee.
I am currently on a monthly payment plan, should I change to a bi-weekly payment plan?
Opting for a bi-weekly payment means that you will see the benefit of an additional monthly payment per the calendar year. This payment plan can be viable if you want to pay your mortgage off faster.
Should I use a mortgage broker for refinancing my mortgage?
Using a mortgage broker will help you mainly if you are still unsure about your refinancing options. Having a mortgage broker will benefit you as they will be able to help you chose the best rates on the market, along with the refinance process. They will also give you a fair estimate, and help you chose the best option for your current situation.