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| Insured ? | 80% LTV ? The rates in this column apply to mortgage amounts between 65.01% and 80% of the property value. The home must be owner-occupied and have an amortization of 25 years or less. You must have purchased it for less than $1 million. These rates are not available on refinances. Refinances require "Uninsured" rates. | 65% LTV ? The rates in this column apply to mortgage amounts that are 65% of the property value or less. The home must be owner-occupied and have an amortization of 25 years or less. You must have purchased it for less than $1 million. These rates are not available on refinances. Refinances require "Uninsured" rates. | Uninsured ? | Bank Rate ? | ||
|---|---|---|---|---|---|---|
Insured 5.04% | 80% LTV 5.15% | 65% LTV 5.15% | Uninsured 6.63% | 6.29% | ||
Insured 4.74% | 80% LTV 4.79% | 65% LTV 4.74% | Uninsured 4.74% | 5.59% | ||
Insured 4.14% | 80% LTV 4.14% | 65% LTV 4.14% | Uninsured 4.49% | 4.89% | ||
Insured 4.29% | 80% LTV 4.14% | 65% LTV 4.14% | Uninsured 4.49% | 4.74% | ||
Insured 3.99% | 80% LTV 3.99% | 65% LTV 3.99% | Uninsured 4.14% | 4.59% | ||
Insured 4.44% | 80% LTV 4.39% | 65% LTV 4.39% | Uninsured 5.9% | 5.5% | ||
Insured 5.09% | 80% LTV 5.29% | 65% LTV 5.29% | Uninsured 5.8% | 7.14% | ||
Insured 4.6% | 80% LTV 4.7% | 65% LTV 4.6% | Uninsured 4.6% | 6.85% | ||
Insured 4.3% | 80% LTV 4.55% | 65% LTV 4.3% | Uninsured 4.3% | 4.65% | ||
Insured N/A | 80% LTV N/A | 65% LTV N/A | Uninsured N/A | N/A | ||
Insured 5.25% | 80% LTV 5.25% | 65% LTV 5.25% | Uninsured 5.25% | N/A |
Do you feel your mortgage interest rate is higher than what’s available in the current market? Maybe it’s a good time to look at your mortgage payments and reassess your finances based on current rates. This process of substituting an existing mortgage with a new one is called mortgage refinancing, and it is typically done to access lower mortgage interest rates, change mortgage type, or access the equity of the home.
It can help homebuyers save hundreds of dollars if evaluated carefully. A mortgage broker can help you identify the best available option for your financial situation. If you keep the mortgage schedule payment as is and get a lower interest rate, the more payment will go towards your principal amount. It also potentially shaves off years of amortization from your mortgage term while also saving you money.
Having said that, refinancing or breaking your mortgage earlier than the scheduled date can incur pre-payment penalty so you must evaluate your finances before making this big move.
There are a few important aspects to keep in mind when looking for mortgage refinance in Canada. A borrower must evaluate their current financial situation and mortgage loan to figure out why they want to refinance at all. A homeowner can apply for refinance if they have 20% equity in their home. That is, if you paid 20% or more downpayment towards your home. However, some lenders may allow refinancing with less equity too. Lenders also consider the appraised value of the home when refinancing.
Mortgage renewal and mortgage refinance are two distinct processes in mortgage financing. Here's an explanation of the difference between the two:
| Refinance | Renewal |
|---|---|
| Refinancing involves replacing an existing mortgage with a new one. | Renewal happens when your existing mortgage term comes to an end. |
| Refinancing could mean you will be changing your lender, depending on the interest rates offered to you. | At renewal, you could continue to be with the existing lender by signing a new agreement, after negotiating your interest rate and terms. |
| Refinancing could be done to access the equity of the home or secure better mortgage terms and lower interest rate. | Renewal does not involve accessing equity of the home, but you can negotiate the mortgage terms and interest rate. |
In order to qualify for mortgage refinancing, the following points must be kept in mind:
Credit Score: Lenders want to make sure the borrower is in good standing (financially) before offering them a new mortgage term. You must have a good credit score to increase your chances of qualifying for mortgage refinancing. Pay your credit card bills, loan payments on time to make sure your credit score is top notch.
Property appraisal: Besides having 20% equity in the home, a borrower must also assess the current value of their property before refinancing. A lender will consider the appraised value of the home and outstanding mortgage balance before making a refinance offer. If your property value has gone down since you purchased your home, the lender is likely to give you a higher interest rate. Also, you cannot refinance a mortgage if it is insured by CMHC or other mortgage insurance company.
Income stability and debt-to-income ratio: Lenders want to make sure the borrower is financially stable, so they will check your employment record and salary history to make sure you can pay the mortgage on time. Lenders will also compare your monthly debt to your income and this ratio will give them a clearer picture of your financial stability.
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The best and easiest way to find out what your home is worth is by looking at comparable homes recently sold in your area. In the case of condominiums, you can look at a comparable condo with the same layout, rooms and square footage in your building to get an estimate of what your condo would be priced at if sold today.
When appraising a property, lenders like to look at estimated property value in an area, basement usage, if leasing, what the lease amount could be based on comparable properties in the area. A real estate agent can help you with the recommended selling price or some websites also have the sold information of properties for homebuyers to look at. This really helps make an informed decision.
There are a few important aspects to keep in mind when looking for mortgage refinance in Canada. A borrower must evaluate their current financial situation and mortgage loan to figure out why they want to refinance at all. A homeowner can apply for refinance if they have 20% equity in their home. That is, if you paid 20% or more downpayment towards your home. However, some lenders may allow refinancing with less equity too. Lenders also consider the appraised value of the home when refinancing.
Refinancing a mortgage can have several positive outcomes for your financial future, but it may also come with certain challenges. Here are some pros and cons of mortgage refinancing to consider:
| Pros of refinancing | Cons of refinancing |
|---|---|
| Lower interest rate: Homeowners can avail a lower interest rate than their original one, if it is available in the market. This can help save money in the long run. | Penalty costs: Costs such as application fee, appraisal fee, legal fee and potential pre-payment penalties on existing mortgage can make the cost of refinancing higher than any future savings. |
| Access to home equity: Refinancing can allow homebuyers to access the equity in their homes, which can be used to purchase another property, pay for home improvements, debt payoff or any other expenses. | Additional debt: Accessing equity in your home could also mean increasing your debt which could raise your monthly expenses. By consolidating your debt, you are buying more time to pay it off, which could go against your financial independence goal. |
| Change loan term or mortgage type: By refinancing, borrowers can get a modified mortgage term which can allow them to pay off the loan sooner than later. It also gives the flexibility to change the type of existing mortgage. | Restarting mortgage: Refinancing could mean you restart your mortgage after already paying down 5 years (or more) of interest and then going back to a 25- or 30-year mortgage. |
Homeowners looking to refinance their mortgages to consolidate their debts will do this with something known as a “cash-out refinance.” This increases your outstanding mortgage balance by the amount of debt you’d like to pay off. This type of refinancing lets the homeowner borrow money on top of their original mortgage loan to pay off high-interest debt in a single monthly payment.
In order to do this, however, you’ll first need to make sure that you have enough equity in your home to pay off your debt. For instance, in the example below, the homeowner has $300,000 of equity in their home and $50,000 in debt they’d like to roll into their mortgage.
When you refinance your mortgage, you are allowed to borrow up to 80% of the value of your home, minus any outstanding balance on your mortgage loan or any other loans secured by your primary residence. However, there are also a number of options for those who want to tap into the equity in their homes without breaking their mortgages. They include the following.
Second mortgages: This is a loan that you take out on your home, which is secured by your home equity. With this type of mortgage loan, as with any type of secured mortgage or HELOC product, you may go into foreclosure if you can’t make your payments and your loan goes into default.
HELOC: A home equity line of credit (HELOC) is a popular way for homeowners to access their home equity. HELOCs often come with flexible payment schedules and allow you to access funding as you need it. This means that you won’t pay interest on any money you haven’t used. The interest rate on a HELOC is typically higher than a 5-year variable rate mortgage.
One major benefit of a HELOC is that you won’t have to break your mortgage, which may mean fewer fees for you in the long run. An additional benefit is the interest payments, which are significantly lower than paying the interest on a lump sum loan. This is ideal for anyone doing renovations who may be having trouble finding the money otherwise. Many lenders will also allow you to convert the balance of HELOC into a mortgage.
Home equity loan: A home equity loan is another name for a second mortgage, but it can also refer to other ways to borrow against your home’s equity. The outstanding principal on your mortgage is subtracted from the amount you’re allowed to borrow from the value of your home.
If homeowners are unable to make the payments and the home goes into foreclosure, the first mortgage lender will be paid out before the second mortgage lender is paid. However, homeowners can also take out a home equity loan after they’ve paid off the mortgage principal on their property. While this would still be considered a home equity loan, it would technically be a first position mortgage as there are no other mortgages on the property.
Homeowners are able to borrow up to the full 80% of their home’s value.
Blended mortgages: Many lenders will allow homeowners to “blend and extend” their mortgages. With this option, homeowners do not have to break their mortgages to access a lower mortgage rate. A blended mortgage lets homeowners combine the rate from an existing mortgage with the rate from a new mortgage to create a new mortgage rate that’s somewhere in the middle. Homeowners can choose to access equity during the process, which will then be added back to their mortgage loan and used to “extend” their mortgage. Homeowners who want to take advantage of this tool but don’t want to extend their mortgages can also request a “blend to term” option where they can secure a lower interest rate without increasing their mortgage term. Because lenders are more likely to lose money on this option, it’s typically only offered to homeowners who want to take out equity, which increases their mortgage amount.
The current mortgage refinance rates are usually higher than the current mortgage rates. The rates you’re offered will often depend on the company you refinance your mortgage with. Remember, refinancing your mortgage means that you pay off your existing mortgage with a new one to tap into a number of potential benefits. Therefore, be sure to consider today’s rates when you refinance a mortgage. While the rates for refinancing your mortgage will be higher than the current mortgage rates, they may still be lower than they were when you originally purchased your home. LowestRates.ca updates its mortgage refinance rates daily. Shop mortgage refinance rates by filling out the form above.
If you’re looking to refinance your mortgage, this graph shows rates in Canada dating back to last year for you to compare.
If you’ve decided to refinance your mortgage for any number of reasons, you’ll want to make sure you secure the best rate. While the rates provided by mortgage refinance calculators can give you a general idea of your costs, the best way to ensure that you secure the best rate on your mortgage refinance is to compare the market before locking into a contract.
At LowestRates.ca, you can find cheap mortgage refinance rates from the top banks and mortgage brokers in Canada. All you have to do is fill out a form to see a comparison of rates from mortgage refinance lenders in your area.
Some other tips for getting a cheap rate on your mortgage refinance include:
Refinancing a second property will be similar to refinancing a primary residence in many ways, except lenders may require you to have more equity in the property than if you were refinancing a home you lived in. Furthermore, rates on a mortgage refinance for a rental property may prove to be higher than if you refinanced the home you live in. This is because the lender knows that your first mortgage will be paid before the one on a second property in the event you default on your payments.
The same goes if you choose to refinance the mortgage on an investment property that you don’t rent out. Rates will likely be higher than if you were simply refinancing the mortgage on your main residence.
Shivani Kaul
About the Author
Shivani Kaul is a content manager in the personal finance space. Prior to this, she worked as a digital editor with Pagemasters North America (a division of The Canadian Press) for four years. Shivani has also worked as a freelance writer and editor for Investor's Digest of Canada and The Ghost Bureau.
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