7 Mortgage Refinance Tips for Homeowners in Ontario

Refinancing your mortgage can be a vital financial tool if you own a home in Ontario. Whether you are after a lower interest rate or want to access home equity, a refinance can have benefits. That said, people prefer the help of a broker or a mortgage refinance lawyer in Burlington, as the refinance process is never simple. This guide breaks down practical mortgage refinance tips: what to watch out for and how to improve savings.

Mortgage Refinance Tips: How To Remortgage Your Home Securely

Refinance goes beyond paperwork. It is a massive financial move, so you need to make sure you achieve financial goals alignment before you apply. These mortgage refinance tips for homeowners cover everything from lender selection to the fees to consider, so that you get the best result.

1. Minimize Prepayment Penalties

In Ontario, ending your mortgage early usually comes with a prepayment penalty, either a few months of interest or something called the interest-rate differential (IRD). Try to refinance near the end of your mortgage term when penalties are lower and you can avoid large fees.

If you still have a while to go, check if your interest savings are worth the penalty. One of the key mortgage refinance tips is to use a refinance calculator to find your break-even point.

For example, if a lower rate saves you $200 a month but costs $4,000 to break the mortgage, you will break even in 20 months. If you stay in your home longer than that, refinance can still be a good move. If not, it might be better to wait until your term ends.

2. Shop Around and Compare All Costs

The interest rate is just one part of what you will pay when you acquire or switch a mortgage. There are other refinancing costs too, such as legal fees and home valuation fees. There are also discharge fees if you change lenders, as well as registration fees (around $70 to $80 in Ontario).

Compare lenders by looking at more than just the interest rate. Ask them to explain all the costs. Rely on a Burlington trusted law firm to check multiple offers and choose the one that has the lowest term. Be sure to ask about special deals like cashback or waived appraisal fees. To make the smartest choice, conduct a complete interest rate comparison to know how much you will save.

3. Know the New LTV Rules for Income Suites

Ontario has updated its loan-to-value ratio (LTV ratio) rules for homeowners to add legal rental units. Initially, you could only refinance up to 80% of your home’s value. Now, if you are building an approved secondary suite, you may be able to go up to 90% LTV. This means you could borrow more money to help pay for renovations that boost your home’s income.

That said, before you refinance, check that your project follows local zoning, building rules, and your lender’s terms. While 90% LTV is permitted in some cases, 80% is still the usual limit for most refinancing.

It is important to remember one of the vital mortgage refinance tips: the higher your monthly payments, the more interest you pay over time. Thus, think about long-term costs before deciding.

4. Don’t Skip the Stress Test & Requalification

One of the key tips for successfully refinancing your mortgage is attention to detail. When you go for mortgage refinance in Canada, there are the same checks as when you first got your mortgage for different types of homeownership in Canada. That means showing proof of income, getting a credit check, and passing the mortgage stress test.

If your income has dropped or your credit score has gone down, you may not get the best rates or qualify at all. Therefore, check your credit report early and fix any mistakes. Gather documents like pay stubs, T4s, and statements for your debts.

Being prepared can give you a chance to ensure credit score improvement or pay off some debt. As a result, your application can become stronger and more likely to be approved.

5. Consider Rate-and-Term vs. Cash-Out Refinancing

Before you get to how to refinance your mortgage, you need to know why to refinance: to save on interest or to get money out. This is where the two main types of refinance come into play.

• Rate-and-Term: You refinance to a lower rate or adjust the repayment, without accessing equity.
• Cash-Out: Borrow above your remaining balance to access cash, subject to the 80% LTV rule (90% for suite projects).

Rate-and-Term leads to a monthly payment and interest rate reduction. Cash-Out gives you funds for renovations, debt consolidation, or other expenses. However, it increases your balance and monthly payments. Calculate how the extra funds will be used versus the cost of added repayment and interest. Ideally, only tap into your equity when the return exceeds the financing cost.

6. Lock In Your Rate Strategically

After choosing a lender, think about locking in your interest rate 30 to 60 days before closing to protect yourself from possible rate increases, as many lenders allow this. That said, keep in mind that if the rates drop before closing, you could miss out on a better deal.

Ask your lender for the details of the rate lock, including any fees or rules if rates change. In case of uncertain market interest trends, locking in your rate can give peace of mind. If you are not sure how long you will keep the mortgage, a shorter rate lock might work better.

It is also important to remember that mortgage insurance costs can rise if your loan-to-value (LTV) goes over 80% so make sure you understand the full cost before locking in a high-LTV refinance.

7. Prepare for a Smooth Closing

Refinancing can get delayed by small things like missing ID, old debt statements, or not having a lawyer ready. Make sure your ID is up to date, and gather the latest statements for any debts you owe. These steps not only help with refinance but also help you deal with common real estate disputes. Send your lawyer’s contact info to your lender early.

If you can, pick a closing date outside the busy season (April to September), as economic conditions impact this process and may cause delays. A smooth closing ensures your funds arrive on time and your old mortgage gets paid off without problems.

Final Thoughts

Refinancing your mortgage can lead to monthly payment decrease, give you access to your home’s equity, and help you get better mortgage terms. To get the most out of it, follow the key mortgage refinance tips, such as comparing all the costs, getting your paperwork ready, and choosing the right refinance option.

When done right and with the right legal support, refinancing can be a smart financial move that leads to greater financial flexibility. Estofa Law offers complete mortgage brokerage services, our real estate legal team tailoring advice and services to your unique case. Book a consultation today to ensure a smooth refinance experience.