Everything You Need to Know About Mortgage Refinancing

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May 23, 2023

Mortgage refinancing is a financial strategy that many homeowners consider as a means of lowering their monthly payments, reducing their interest rates, or accessing the equity they have built up in their homes; however, the process can be confusing, and there are many factors to consider before making a decision. The expert mortgage lenders from PHL Capital has put together some information covering everything you need to know about mortgage refinancing in British Columbia, so that you can make an informed decision.

What is Mortgage Refinancing?

Mortgage refinancing involves substituting an existing mortgage with a new one that features different terms and conditions. This could include a lower interest rate, longer or shorter loan term, or switching from a fixed-rate to a variable-rate mortgage.

Find answers to some of the most common questions about mortgage refinancing.

Why Should You Refinance Your Mortgage?

There are several reasons why homeowners choose to refinance their mortgage, including:

  • Lowering their interest rate: By refinancing to a lower interest rate, homeowners can save money on interest payments over the life of their mortgage.
  • Shortening their loan term: Refinancing to a shorter loan term can help homeowners pay off their mortgage sooner and save money on interest.
  • Accessing equity: Homeowners can refinance to access the equity they have built up in their home, which they can use for home renovations, debt consolidation, or other expenses.

When Should You Refinance Your Mortgage?

The best time to refinance your mortgage depends on your individual financial situation and goals; however, here are some common scenarios when refinancing may be beneficial.

  • Your credit score has improved since you first obtained your mortgage.
  • Interest rates have decreased since you first obtained your mortgage.
  • You want to go from a fixed-rate to an adjustable-rate mortgage or vice versa.
  • You want to access the equity you have built up in your home.

The Refinancing Process

The refinancing process is similar to the process of obtaining your original mortgage. You will need to provide documentation of your income, assets, and debts, as well as a property appraisal. Once your application is approved, you will need to sign a new mortgage agreement and pay any closing costs associated with the refinance.

Risks and Considerations

Before refinancing your mortgage, it is important to consider the risks and potential downsides, including:

  • Prepayment penalties: If you refinance before the end of your mortgage term, you may be subject to prepayment penalties.
  • Longer loan terms: Refinancing to a longer loan term may reduce your monthly payments, but it will also increase the total amount of interest you pay over the life of your mortgage.
  • Fees and closing costs: Refinancing your mortgage comes with several fees and closing costs, which can add up quickly.

If you are considering refinancing your mortgage, the team at PHL Capital can help you explore your options and make an informed decision that aligns with your financial goals. Contact us today at 604-579-0847.