5 Things to Know Before Applying for Mortgage Refinancing

mortgage refinancing


A huge portion of mortgage applications revolves around mortgage refinancing, possibly because of the low interest rates being offered which is quite appealing to homeowners. Most of them view this as a chance of restructuring their finances especially when there are changes to their financial situation.

The question now is whether you should apply for mortgage refinancing yourself? This depends mostly on your current circumstances rather than what the interest rates are for this week. With that being said, if you are considering whether to apply for mortgage refinancing or not, there are a few factors that you should take into consideration.

  •  Determine the equity in your home. If you are considering applying for mortgage refinancing, you should determine the equity in your home. Although there are properties that have picked up after being bought, some may not have gained enough value for them to be refinanced. Keep in mind that applying for mortgage refinancing with little to no equity may not pass with traditional lenders. If you have at least 20 percent equity in your home, it will be easier for you to qualify for a new loan.
  •    Know what your credit score is. Lenders are becoming stricter with their requirements for loans that even when you have good credit, it may not always mean that you’ll be given low interest rates. If you want to get lower interest rates, your credit score should ideally be 760 or up but there is no guarantee. Although it is still possible for you to get a new loan, the interest rates are going to be higher.
  •    Costs of refinancing. Refinancing your home will cost you 3 to 5 percent of your total loan amount, but it is possible to bring it down or combine them in a loan. If there is enough equity in your home, you can reduce the cost in your new loan if you raise the principal. There are even lenders that can offer a “no-cost” refinance option which also means that your interest rate will be higher because of the closing costs.
  •     Find out your debt-to-income ratio. Lenders are also strict when it comes to debt-to-income ratios. Your overall debt-to-income must be 36% or less, with some lenders willing to go up to 43% if there are positive factors included such as having a long, stable job, high income, and even substantial savings on the homeowner’s end.
  •       Weigh rates vs term. The interest rate on your new loan is worth considering, but you should also determine what your goals are when it comes to refinancing. If you want to lower your monthly dues, you should look for a loan that offers lowers interest rate and with a longer term.

Apply now for your mortgage refinancing in Canada with us.

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