With mortgage rates dropping in 2024, and with lots of value and equity built up in homes across Canada, now could be the ideal time to unlock your equity with a mortgage refinance. 

Are you looking for the BEST refinance mortgage rates and information to:

• Save on interest costs?
• Improve cash flow?
• Consolidate Debt?
• Remodel or renovate your home?
• Invest?
• Any combination of the above?

We are laser-focused on approving mortgage refinances for these reasons or any other reason in a simple, no-nonsense way, at the absolute best rate.

As a leading Canadian Mortgage Broker having worked with hundreds of mortgage refinance transactions, I take all the best refinance information I have learned over the past 16 years and distilled it into the article below. Feel free to connect for a no-obligation conversation, at any time.

What is a mortgage refinance?

 Simply put, a mortgage refinance is a new mortgage on your home. It involves paying out your existing mortgage, with a new mortgage. This new mortgage can be with your existing lender, as a no penalty, no break, ‘increase and blend’ with the existing balance. Or the mortgage can be totally moved to a different lender. At Altrua, as brokers, we look at the cost/ benefit of each situation to see what makes the most financial sense. 

Because you are technically restarting the mortgage, you’ll have some options:

• Rate (fixed or variable)
• Mortgage Term
• Payment (Do you want to lower your payment by stretching the amortization, or increase the payment by shortening it? Noting there are pre payment flexibilities in either case!)
• Mortgage Amount (depending on your goals you could decide on less, more or the same amount of mortgage balance)

The refinance or ‘restarting’ can happen any time during a mortgage term, or on the renewal/ maturity date, or even after a mortgage has been completely paid off to pull out home equity. 

Detailed Step-by- step guide to complete a refinance

1. Information gathering: Have a good idea about (1) the approximate value of your home, (2) your existing mortgage amount, (3) credit score (do you think your credit Good, OK, needs work?) and (4) annual income/ salary.
2. Start a Conversation: Connect with us at Altrua, or another Broker or lender of choice and start a conversation about refinancing a mortgage
3. Mortgage Application: You will likely be asked about the information that you gathered in step 1 above, as part of a mortgage application.
4. Fine Tuning: Your broker or bank should ask a few additional questions about your refinance goals and some specifics of your financial situation.
5. Pre Approval: Your broker or bank will pre approve (a preliminary check to see if and how you’d like to proceed)  based on this information and will provide details about  the mortgage amount and rate that you are likely to end up with in a full approval.
6. Full Approval: If the pre approval offer sounds good to you, the broker or bank can submit for a full mortgage approval.
7. Answering Questions: The broker or bank obtains the full approval document and answers any questions you may have about it before signing it.
8. Mortgage Finalizing: The mortgage approval document is signed, any documentation required is provided to the lender (employment letter, a paystub, property tax information) and an appraisal may be completed (if required by the lender).
9. Payout of Funds: The new mortgage closes at your new rate, any debts you want paid out are automatically paid out by a legal service or lawyer, and any additional funds that you worked in to your refinance are paid out to you either by certified cheque or direct deposit from the legal service or lawyer tasked to closing your refinance.
10. Mortgage Maintenance: Work with your Broker over time to ensure your plan is on track and that you are always up to date on opportunities to save more on your rate and cost of borrowing.

There’s a few steps here, and if it seems overwhelming – don’t worry. At Altrua we do everything we can to make the process stress free and pleasant. Connect with us for more!

Why Refinance your Mortgage? Here are the top tips for each refinance purpose

A refinance mortgage can be used for pretty much any reason you can think of. Here are some of the most common refinance options and advice for your best result:

Refinance Mortgage to Lower Your Rate

• Don’t settle for the first rate offered by your existing lender or any one bank.
• Use the services of a good mortgage broker, or shop between lenders yourself to get a better rate.
• Ensure the fine print includes good flexibility to allow for real estate and other life changes that may come up in the future. 
• This flexibility more specifically will help you get ahead faster on your new mortgage, and save you from unexpected high penalties, high costs or high rates on your renewal date, and other high expenses that can hide in the fine print.
• Reconsider variable vs fixed rate – one or the other may save you more at this point in time and point in the economic cycle.

Refinance Mortgage to Consolidate Debt

• Consider the difference between paying down your credit, and closing your credit.
• If you want a certain credit card or credit line to remain open/ accessible after the refinance is complete, then request this from your Broker or lender otherwise it might be permanently closed.
• If your overall monthly payment drops because you don’t have loan or other credit payments, consider increasing your mortgage payment to get ahead faster on your mortgage. 
• If you increase your mortgage payment, you still gain the benefit one, simple payment and will also save even more on interest because you are paying down your mortgage faster.
• If set up properly using mortgage pre-payment privileges, you can turn off and on these extra mortgage payments throughout the term incase of a cash flow issue or emergency during the term.

Refinance Mortgage to Renovate Your Home

• It may sound overly obvious but often this is an issue: Ensure you obtain more than enough funds during your refinance to cover the cost of renovating or updating your home. 
• Often costs will go over budget and if there is not enough funds to complete the project you could find yourself with an uncompleted project or going into a credit card or other debt to complete the refinance.
• If you have money left over after the renovation project is complete, it is very easy to put this money back against your mortgage in the form of a mortgage prepayment.
• If you take out too much, it is very easy to put the money back against your mortgage, but very hard (right after a refinance) to access additional funds.
• If you are looking to gain the most increase in the value of your home from your renovation project, focus on (1) Kitchen (2) Bathrooms (3) Basement. Improvements in these areas will have the most effect on increasing your appraised value and market value.
• If you are looking to get the most economic value from your renovations, understand that there is a diminishing rate of return on every dollar spent. For example, the first $10,000 of your project may add $20,000 to the value of your home. While the next $10,000 of renovations may add $15,000 of additional home value. The next $10,000 added to your project may break even adding $10,000 of value and so on until you get to a point where the money you are spending is no longer resulting in a positive net return on the value of your home. This is just an example and will differ depending on the home and the neighborhood.

Refinance Mortgage to Invest

• There are many Canadians who have high pensions, and low RRSP limits because of these pensions, which may be wise to invest low-interest mortgage money into a TFSA. The TFSA can be a very powerful and effective tool when funded with a low mortgage rate. This tax-free investing is potentially a big opportunity for many Canadians. 
• The money that you use to invest in any non-registered investment (non TFSA or RRSP investment) is likely tax-deductible.
• For example, the funds used to invest in a rental property, stock or bond, second mortgage investment or other income-producing investment are likely tax-deductible. 
• For example, if you pay $10,000 per year on interest for money used to invest with, and if you are in a 40% marginal tax bracket – then, in this case, you could write off $4,000 of interest resulting in a $6,000 after-tax interest cost ($10,000 – $4,000 = $6,000). Reflected as a rate, a 2.49% interest rate, using the same 40% marginal tax bracket, becomes an after-tax effective rate of 1.49% (a 2.49% rate minus 40% or 2.49% times 0.60)
• Consider taking a higher fixed rate, since as an investor the payments will be more consistent on your mortgage, and also the slightly higher rate than variable (at the time of writing) will result in a bigger tax deduction. A lower variable rate that carries a higher risk premium will also result in higher after tax costs because there is less income tax to deduct. 

Mortgage Refinance vs Home Equity Line of Credit (HELOC)

A mortgage refinance:

• Results in a much lower interest rate than a HELOC
• Is much better for funds that you need now for a major project, debt consolidation, or investment.
• If desired, the mortgage can be paid back quickly using the mortgage pre payment privilege.
• Once the money is paid back into the mortgage, it can not be taken out again unless you refinance again.

A HELOC:

• Offers the ability to access home equity at a later date, if the funds are not required in the short term.
• Usually, mortgages that involve HELOCs carry higher overall interest rates – they are more expensive even on the non HELOC portion of the mortgage.
• Good if money is borrowed for a short period (less than a year) and then paid back quickly. 
• Money that is paid back can easily be accessible again (good for self-employed or some investors).
• Can be used as emergency funds, but there are likely better, less costly financial planning alternatives to an emergency fund than registering the mortgage as a HELOC.

Bad credit mortgage refinance

If your credit has turned south for one reason or another, and if you are looking for a bad credit mortgage refinance then this is usually not a problem as long as you have home equity built up. 

The rate on a bad credit mortgage refinance can be a bit higher  – maybe 0.50% to 1.5% higher than the lowest rates – however this rate can be lowered in a year or two once we get your credit back up over this time.

Once the refinance consolidates debt and takes care of any other credit issues, it’s just a matter of staying on track and your credit score will improve. 

Tools and Resources for Refinancing Your Mortgage

• Refinance Calculator
• Variable vs fixed
• Open Vs Closed
• Best refinance rates

When is it worth it to refinance your mortgage? 

Refinancing always involves some sort of a ‘cost – benefit analysis’. 

There often can be some sort of cost or expense associated with refinancing, including potentially a legal fee or penalty to break your existing mortgage – but the main question here is does the benefit outweigh the cost?

Determining your net benefit is our goal and the following questions can help determine if and when to refinance your mortgage.