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Mortgage Refinance Calculator

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Mortgage Refinance Calculator

Refinancing is renegotiating your existing loan or applying for a new loan where you already own the property. The new mortgage terms could include a different interest rate than your existing loan agreement. It could also increase the mortgage’s amount (or balance) and the mortgage’s life (or amortization). Simply put, a refinance entails buying time or money. 

Another reason you may want a refinance is to change the covenant on your home’s title – in plain words, you are adding or removing someone on the home’s title.

Refinancing your mortgage should better your financial situation for various reasons.  Generally, most borrowers’ reasons for refinancing will be to access a home’s equity, lower interest-carrying costs, or consolidate debts. As for a covenant change, this is more reasonable when adding or removing a family member from your home’s title. Change of title may be completed to add a family member to your home’s title to help you qualify for your current mortgage or remove a party to make it easier for them to qualify.

When choosing to move forward with a refinance, a cost analysis should be completed with a mortgage expert to determine if it makes financial sense for your situation. The biggest cost during any refinance will be breaking your current mortgage. Why? A refinance is a more affordable option if you’re at the end of the current term of your mortgage, as you will not have a penalty to pay out.

Wondering how much you could save with a refinance? Use nesto’s handy Mortgage Refinance Calculator to see how you can benefit from tapping into some of your home equity.

What is a mortgage refinance?

Refinances can occur for many reasons. Let’s outline the top ones now:

  • Extending your mortgage balance or amortization would be considered a refinance.
  • A refinance would involve changing a mortgage covenant, such as adding or removing someone from the property’s land title. 
  • Adding a HELOC by changing the registered charge on the property would be considered a refinance.
  • Combining a HELOC and mortgage that are separately mortgaged on the same property’s title but with different lenders will be considered a refinance.
  • Combining two separately registered collateral charges on the same property may be considered a refinance. 
  • Transferring a mortgage to a prime (A) lender from an alternative (B or private) lender will be considered a refinance.

Also readHere’s How You Can Benefit from Refinancing Your Mortgage

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3 Main Reasons to Refinance

Lower your borrowing costs

When interest rates are low, it might be time to re-examine your borrowing strategy.  A borrowing strategy involves making a financial decision through cost analysis.  Comparing the costs involved in the current scenario versus the costs involved if you go through a refinance

These costs can include interest-carrying costs for the replacement mortgage, penalties and fees to discharge your current mortgage, and costs (i.e. legal and appraisal fees) to take on a new mortgage. Speaking to one of our commission-free mortgage experts to get specific numbers that apply to your situation will help you make this decision quickly.

Access home equity

Equity is the residual ownership of your home – meaning there is no mortgage on that portion. It’s the portion of the mortgage that you have already paid down alongside any growth in the value of your property. In the context of equity, a mortgage implies any leveraging such as a mortgage, second mortgage, secured charge, secured loan or even a secured line of credit against which a credit facility is secured. You can borrow up to 80% of residential equity that you may have built up in your property since you purchased it.

In the example below, you could leverage up to $100K in an additional mortgage, which is part of the 80% of your equity in your $500K property.

Property Value (estimated $500K) less Mortgage (balance $100K) less HELOC (balance $50K with limit $200K note that you must use the limit amount)

= ($500K x 80%) – $100K – $200K = $100K

Additionally, it is important to note that HELOCs and any other revolving credit facilities (as some mortgages even allow for large secured credit cards) have limitations, as their total limits cannot exceed 65% of the total property valuation.

Consolidate Debts / Increase Cash Flow

Consolidating debts with higher interest carrying costs into a single payment at a lower interest rate can be a great way to get ahead by making your home’s equity work for you. Since real estate is a very safe long-term investment, your mortgage, which is secured against it, will generally have the lowest interest rate.

Taking advantage of paying out higher-interest debts such as student loans, car loans, personal loans, credit cards, and lines of credit and moving the balance over to a mortgage will generally save you money for the shorter term. Discuss your situation with one of our commission-free mortgage experts to validate if it will save you money over the short or long term.

Moreover, consolidating can have other side effects, such as freeing up your cash flow. This increased cash flow can be used to build your savings, save for a specific goal or purpose, pay down your mortgage faster – or put it towards your longer-term investment goals, such as contributions to your RRSPs or TFSAs.

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How to use the Mortgage Refinance Calculator

Using the mortgage refinance calculator in Canada is a straightforward process that empowers individuals to determine their potential savings and benefits from refinancing their mortgage. Simply gather all the necessary information, such as the current mortgage balance, interest rate, remaining term, and any additional costs associated with refinancing. This information is key to accurately calculating the potential savings.

Once you have the necessary information, input it into the mortgage refinance calculator. Be precise in entering the data to receive an estimate of the new monthly payments, total interest savings, and the break-even point for the refinancing. The calculator provides a detailed breakdown of the potential financial impact of refinancing, ensuring you can make an informed decision based on your specific financial situation.

After using the mortgage refinance calculator, it’s important to carefully review the results to determine if refinancing is viable. Consider factors such as the length of time you plan to stay in your home, the potential savings on interest payments, and any associated costs with refinancing. By using nesto’s mortgage refinance calculator in Canada, borrowers can confidently decide whether refinancing their mortgage aligns with their financial goals.

It’s always prudent to consult nesto’s mortgage experts. Our experts can run scenarios with you, provide personalized advice, and ensure your cost savings benefit is worthwhile for your financial circumstances. 

Why choose nesto

At nesto, our commission-free mortgage experts, certified in multiple provinces, provide exceptional advice and service that exceeds industry standards. Our mortgage experts are non-commissioned salaried employees who provide impartial guidance on mortgage options tailored to your needs and are evaluated based on client satisfaction and advice quality. nesto aims to transform the mortgage industry by providing honest advice and competitive rates using a 100% fully digital, transparent, seamless process.

nesto is on a mission to offer a positive, empowering and transparent property financing experience – simplified from start to finish.

Contact our licensed and knowledgeable mortgage experts to find your best mortgage rate in Canada.