How to save money by Refinancing your home.

Moving homes can be expensive, in fact it is more costly than ever, and there logistics to consider. For those that actually like, or at least don’t mind their neighbours, or they live in a great school district … there are for many reasons that people before embarking on an expensive move. We believe in a client-first approach, and providing the expertise and insight that clients need for all their mortgage needs to assist people in making smart decisions with their money and helping people be mortgage-free faster.

Residents in Durham region who purchased homes just a few years ago have found significant increases in property value. For my family, our home in Brooklin could sell for double the original price now. We could sell, and make a pretty penny. However, unless we are willing to endure longer commutes and new schools for the kids, this isn’t the answer for my family.

We’ve made the decision to renovate, because we have a strong connection to the neighbourhood, and know we want to stay in this growing and vibrant community for the foreseeable future - we are not alone. In fact, 70 per cent of homeowners that are considering moving or renovating decide to stay in their home and renovate. People approach us every day with similar questions and for many, refinancing their home to access the available equity is a great option. Refinancing is not the solution for everyone; for those that are dedicated savers it would be better to continue to save the funds required to finance renovations, as there is always a cost to borrowing money. However, when compared to other financing options such as a line of credit or credit card, rolling the funds into a mortgage can be a better option and provide the funds to make your dream home renovation a reality.

What is the advantage to mortgage refinancing? You can pay off your mortgage much sooner than you ever expected, and save tens of thousands of dollars by rolling money into your mortgage and using your prepayment privileges. One of the benefits our clients receive by working with us, is that we conduct annual mortgage reviews which can help pay off their mortgage faster using the options on their mortgage. This service is free and can save time and money on your mortgage.

How does refinancing work? Your liabilities, home value and income are calculated to determine the maximum mortgage amount. A mortgage refinance involves placing a new mortgage on your home. The process is similar to obtaining a mortgage to purchase a home. For those who qualify the maximum is 80 per cent of the appraised value of your home. You are able to choose a mortgage product from one of our 57 lenders that suits your needs. When all of the mortgage details are finalized, and the lender is satisfied, the lawyer will change the title of the property and forward you the funds you have requested.

What is the cost difference between using a credit card or line of credit or rolling the funds into your mortgage?

Consider the following example: Example 1 – Mortgage + Credit Card + Line of Credit Our client is undertaking some renovations, which cost $38,500. They decide to use some unsecured credit products available to them. Here is a snapshot of their current financial situation: In this example the above client would have $2882 total bill payments each month for the items listed.

Example 2 – Mortgage for the total value needed We can consolidate to one monthly mortgage payment instead, of making several payments per month,. If we take the total amount they borrowed plus an estimated $2500 penalty to break their mortgage early and $1500 to cover a lawyer and appraisal costs, the total mortgage amount is $392500. This mortgage would cost $1937/month. The clients are saving $945 a month.

If the clients were able to pay $2882 per month comfortably (as in example 1), then we could use prepayment privileges on their mortgage to put the extra $945 on the new consolidated mortgage each month. This would save the client $85 864 in interest payments and have them mortgage-free 10 years and 8 months faster.

How to find out if this is an option for you Please contact us if have a renovation in mind that you would like to discuss financing, or if you have some accumulated debt, a high interest car payment or credit card. We are happy to provide a calculation like the one above for your specific situation at no cost to you. All it takes is the time for a quick chat to see if the numbers would make sense for your specific situation.