Mortgage Refinance Calculator
Mortgage Refinance Calculator
Refinancing is the act of renegotiating your existing loan or applying for a new loan where you already own the property. The terms of the new mortgage could include a different interest rate compared to your existing loan agreement. It could also allow for increasing the amount (or balance) of the mortgage; as well as the life (or amortization) of the mortgage. Simply put, a refinance is buying time or money.
Another reason that you may want a refinance is to change the covenant on your home’s title – in plain words this means that you are adding or removing someone on the title of the home.
Refinancing your mortgage should better your financial situation for various reasons. Generally, most borrowers’ reasons for refinancing will be one of the following: to access a home’s equity, lower interest carrying costs, or consolidate debts. As for change of covenant, this is more reasonable when you are adding or removing a family member from your home’s title. Change of title may be completed to add a family member on your home’s title to help you in qualifying for your current mortgage, or removing a party to make it easier for them to qualify for their own mortgage.
In all cases, when choosing to move forward with a refinance, it is advisable that a cost analysis should be completed to determine if it makes financial sense for your situation. The biggest cost during any refinance will be the cost to break 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.
- Changing a mortgage covenant, such as adding or removing someone from the property’s land title, would be considered a refinance.
- 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.
Three 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, in addition to penalty 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 mortgage experts at this point to get specific numbers that apply to your situation will truly help in making 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 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.
In the example below, you could leverage up to $280K in additional mortgage which is 80% of your $350K of residual equity in the property.
Property Value (estimated $500K) less Mortgage (balance $100K) less HELOC (balance $50K with limit $200K)
= $500K – $100K – $50K = $350K
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 valuation of the property.
Consolidate Debts / Increase Cash Flow
Consolidating debts that have 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 rate of interest.
Taking advantage of paying out higher interest debts such as student loans, car loans, personal loans, credit cards, lines of credit and moving the balance over to a mortgage will generally save you money for the shorter term. To validate if it will save you money over the short or long term, discuss your particular situation with one of our mortgage experts.
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 goal such as contributions to your RRSPs or TFSAs.
How to use the Mortgage Refinance Calculator
Simply plug your details into nesto’s Mortgage Refinance Calculator and see what you could save. If refinancing your mortgage makes sense at this point in time, reach out to one of our mortgage experts and nesto will find you the lowest rate.
How nesto works
At nesto, all of our mortgage advisors hold mortgage professional designations from one or more provinces concurrently. We believe that our clients will receive the best advice and care when they speak with specialists that exceed the industry status quo.
Unlike the industry norm, our agents are not commissioned but rather salaried employees. This means you’ll get free unbiased advice on the most suitable mortgage solution for your unique needs. Our advisors are measured on the satisfaction and quality of advice they provide to their clients.
nesto’s working hard to change how the mortgage industry functions. We start with honest and transparent advice, followed by our best rates up front. We are able to offer you these best rates by using technology by providing a virtual and 100% online process to reduce our overhead costs.
By working remotely across Canada, all our advisors and staff spend less time commuting to work and more time with their friends and family. This makes for more dedicated employees and in turn contributes to our successes with happy and satisfied clients.
nesto is on a mission to offer a positive, empowering and transparent property financing experience, simplified from start to finish.
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