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What is mortgage refinancing and when to do it? (so you get the best rates)

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March 15, 2018 - Karl Yeh

Is your current mortgage about to come up and you're looking for better rates? Or do you have some additional equity you want to spend? In this episode, we discuss what it mean to refinance your mortgage, the different types of refinancing options, when would you do it and if there are any associated penalties. 

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Karl Yeh:

Hi everyone. Welcome to another edition of Homebuyer's School.

Today I'm joined by Mujtaba Syed, Manager Mobile Mortgage Specialist with TD Canada Trust..

The question we're going to answer is[00:00:30]:

"What are the different types of mortgage refinancing?"

Mujtaba Syed:                  

That's a good question, Karl.

So we actually have different types of refinancing available for different situations that you might have.

If your term has come up with your current bank rate now, and you're looking at moving into a different institution for a better rate, that is also considered a refinance.

It's also considered a transferring as well.

But if you also feel like, hey, you've actually paid down your mortgage, there's some equity available, you want to be able to use that equity for whatever needs you might have.

It could be debt consolidation, [00:01:00] paying off some loans, purchasing, an investment. we can also take money out, which is also considered an equity takeout, which is also a mortgage refinance as well.

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Karl Yeh:                             

So when would you actually refinance from a transfer point of view? When are some situations that would occur?

Mujtaba Syed:                  

Yeah, so technically if your term is coming up, and you feel like there's better rates available or better terms available with a different institution, that'd be a great time to actually talk about that transfer from [00:01:30] your current bank to a different bank.

Just to see how much of a benefit it is for you to actually move institutions all together.

Usually, banks will give you four months prior to your renewal date to actually give you that time to kind of shop around and decide if you would actually like to stay with your current institution or actually go to a different institution for maybe better rates.

Karl Yeh:                             

Is there a penalty if you want to transfer before that four month period?

Mujtaba Syed:                  

 So, for before the four month period, you can actually [00:02:00] renew with your own bank within the four months without any penalties.

But if you did decide to actually leave prior to your term actually coming up for renewal, then definitely there's going to be a penalty.

And the penalties could determine, could just be based on a lot of different things. So I would definitely have a conversation with your bank to see if there are any penalties and if there are, what type and how much are they.

Karl Yeh:                             

When should you refinance a mortgage?

Mujtaba Syed:                  

Yeah, so if you ever feel like you want to be, your term is coming [00:02:30] up would be a great time to actually look at switching banks if you're getting a better, more competitive rate.

Or another good time is to see if you have some equity available, if you actually paid down your mortgage, done a great job in paying it down, and you feel like you want to be able to use those funds towards debt pay down, you want to pay off some loans or credit cards.

You want to be able to take the money and invest it into other things or even purchase. It would be a great time to refinance your home [00:03:00].

Karl Yeh:                             

When someone says, "I  want to take out a second mortgage," is that the same thing as refinancing a mortgage? And when would you do that?

Mujtaba Syed:                  

So taking out a second mortgage just means to the bank is that you're actually taking out, putting a lien after your first mortgage.

So let's say if your first mortgage is in place right now, you still have some time remaining on your term, and you still need some money available, and you don't want to break your term and face the penalty.

Banks do offer you the option of taking a second mortgage out on your [00:03:30] home if there's equity available.

And that's a very good option to you, actually exercise if you feel like there is a need for you to actually access some funds.

Karl Yeh:                              So Mo, do you have anything else to add?

Mujtaba Syed:                  

Yeah, what I would say, I would definitely recommend reaching out to your bank, to your lender, to your specialist to see if taking some extra funds out would actually impact your current mortgage right now.

That's a great conversation to have with them.

And to see, but if you definitely need some extra funds, book an appointment with your specialist and see what your options are.

Karl Yeh:                              [00:04:00] Great. Well, perfect. Well, thank you very much, Mo.

Hey everyone, just remember we have a lot of videos on mortgage preapproval and especially our new video no the new mortgage rules in Canada. Well, thank you very much for joining us, and we'll catch you next time.


Your turn:

Let us know if you have additional mortgage questions or home buying questions that we can answer by submitting them in the comments section below. 

Homebuyer's School publishes new content weekly so subscribe or check back regularly for the latest information, strategies and tips from homebuying experts. 

About Mujtaba Syed:

Mujtaba is an experienced mobile mortgage specialist with a demonstrated history of working in the banking industry. Skilled in Negotiation, Commercial Lending, Banking, Sales, and Credit Analysis. Strong product management professional.

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