Why Now May Be the Best Time to Refinance in Canadian History

After the winter that seemed like it would never end, spring is finally here! Spring is the perfect time to enjoy the outdoors, spring clean (sorry, I couldn’t resist!) and of course, buy a home. The first shots have already been fired in what seems to have become a yearly tradition. Two of the big banks, TD and BMO, lowered interest rates on their 5-year fixed mortgages to a record low of 2.79 percent. When the big banks, who are notoriously stingy with their posted rates, are offering mortgage rates this low, it has to be a good sign! If this is a sign of things to come, it looks like this year could be another record-breaking spring housing market.

With record-low mortgage rates there’s never been a better time to consider refinancing your mortgage. In fact, right now is perhaps the single best time to refinance in Canadian history. Anyone who’s mortgage rate is above 3 percent should seriously consider financing their mortgage. Here are three good reasons to consider refinancing your mortgage.

Lower Mortgage Rates
Mortgage may be at a record-low today, but if you locked-in to a 5-year fixed rate mortgage 3 or 4 years ago, you might not be so lucky. Your mortgage is most likely the largest debt of your lifetime; lowering your mortgage rate can pay dividends big time. When you refinance your mortgage, you pay off your current mortgage and take out a new one. Refinancing only makes sense if you’ll save more money than the hefty mortgage penalty you’ll have to pay (more on that below). Before you break your mortgage, speak with your lender to find out what the penalty will be.

Tap into Your Home’s Equity
With home prices skyrocketing , there’s never been a better time to tap into the equity in your home. Whether you’re looking to build that gazeebo you’ve always wanted, go on a dream vacation or help fund your retirement, refinancing your mortgage can be your golden ticket. If you take out an unsecured line of credit, loan or charge it on your credit card, it can end up being costly. If you find yourself house rich, cash poor, refinancing your mortgage will let you have your cake and eat it, too. You can hold onto your house and borrow money at ridiculously low interest rates. When you take out a HELOC, you can tap into up to 65 percent of your home’s appraised value.

Debt Consolidation
Are you up to your ears in debt? Are creditors sending you past due notices nit he mail and hounding you on the telephone? Before you throw in the towel and sell your house, there may be a better option. Debt consolidation offers the best of both worlds: solve your personal debt situation and hold onto your home – it’s a win-win situation! With debt consolidation, you roll all your existing debt into a single loan at a substantially lower interest rate. Paying 3 percent sure beats the heck out of 18 percent or higher charged by credit cards! When you consolidate debt, your new mortgage pays off all your existing debts. Basically, you start with a clean slate.

Mortgage Penalties

If you have a closed mortgage like most Canadians, you’ll have to pay a mortgage penalty to escape the shackles of your bank. If you have a variable rate mortgage it’s pretty straightforward: three months’ interest. If you have a fixed rate mortgage, you’ll pay the greater of three months’ interest or the Interest Rate Differential (IRD). If you’ve ever heard the mortgage horror stories of homeowners paying $10,000 or more in mortgage penalties, it’s because of the IRD. Take the time to sit down with your mortgage broker and do the math to make sure refinancing your mortgage makes sense.

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