Refinancing your mortgage can be a useful financial tool for homeowners in Canada. One of the benefits of refinancing is accessing home equity to pay for big-ticket items like home renovations, education expenses, or other investments. 

However, before refinancing your mortgage, it’s essential to understand how it works and how you can use an equity refinance calculator to access your home equity. You probably have a ton of questions about how this work, so we’ll explore reasons to refinance your mortgage, how to refinance, and how to use a home equity refinance calculator to access home equity.

---

Key Highlights

• Refinancing your mortgage can help you lower your monthly mortgage payment, change your amortization schedule to pay off your mortgage sooner, and access your home equity.
• Refinancing involves researching different financial institutions, gathering financial documentation, applying for refinancing, and reviewing the terms and conditions of the refinanced mortgage.
• A refinance calculator can help you understand how much home equity you can access through refinancing. It’s essential to analyze the results, consider your closing costs, your financial situation, and your long-term financial goals.

---

Reasons to Refinance Your Mortgage

Refinancing your mortgage can provide you with several benefits, including lowering your monthly mortgage payment, changing your amortization schedule to pay off your mortgage sooner, and accessing your home equity. 

Before making any decisions about refinancing, be sure to do your research and speak to a mortgage professional to ensure that refinancing is the right choice for your financial situation.

Lower my monthly mortgage payment

One of the most significant benefits of refinancing is lowering your monthly mortgage payment. If interest rates have dropped since you took out your mortgage, refinancing can help you secure a lower interest rate, which can significantly reduce your monthly mortgage payment.

Change my amortization payment schedule 

Another reason to refinance is to change your amortization schedule. This can help you pay off your mortgage sooner, which can save you a significant amount of money in interest payments over time. By shortening your mortgage term, you can increase your monthly mortgage payment, but you will pay off your mortgage sooner and ultimately save money in the long run.

Access home equity

Accessing your home equity is another reason to refinance. By tapping into the equity in your home, you can use the funds for a variety of purposes, such as home renovations, education expenses, or other investments. Refinancing allows you to access this equity by increasing your mortgage amount, so you can borrow against the value of your home.

How to Refinance your Mortgage

Refinancing your mortgage can be a straightforward process if you follow these essential steps. The first step is to research and shop around to find the best refinancing options for you. This involves researching different financial institutions, comparing their mortgage rates, terms, and conditions, and speaking to a mortgage broker for expert advice.

After finding the best refinancing option for your needs, you need to gather your financial documentation. This includes your mortgage statement, credit report, income statement, and any other relevant financial documents that your financial institution requires.

Once you have all the required documentation, you can apply for refinancing. Your financial institution will review your application and may require additional documentation or information before approving your application. Once approved, your financial institution will provide you with a new mortgage agreement that outlines the terms and conditions of your refinanced mortgage.

Using A Refinance Calculator to Access Home Equity

If you’re considering accessing your home equity through refinancing, a refinance calculator can be an invaluable tool. Refinance calculators are available online and are easy to use. They allow you to input your current mortgage information, your new mortgage information and can calculate how much home equity you can access through refinancing.

The first step in using a refinance calculator is to input your current mortgage information, including your mortgage balance, interest rate, and remaining term. This information will provide a baseline for your calculations.

Next, enter the new mortgage information into the calculator, including the new mortgage rate, term, and any other relevant information. The calculator will then generate an estimate of how much home equity you can access through refinancing.

Once you have the results from the refinance calculator, it’s time to analyze them to decide whether refinancing is the best option for you. Consider factors such as closing costs, your financial situation, and your long-term financial goals before making a decision.

Understanding Mortgage Refinance Calculator Components

Asking Price

This price at which the seller offers their property for sale. This should be distinct from the property value, which is lesser than the agreed-upon sale price or the appraised value. The property value is what your mortgage lender will use to calculate all other factors in your mortgage commitment.

Down Payment

The down payment is the difference between the purchase price and the mortgage amount. This sum of money includes the deposit you make to the seller when you accept the offer to purchase the property and the money you give towards your purchase price to your solicitor on the day of your mortgage closing.

Amortization Period

The amortization period is the length of time it would take you to pay off a mortgage in full, based on regular payments at a certain interest rate. Assuming the interest rates are the same, a longer amortization period means you will pay more interest-carrying costs over the life of the mortgage versus a shorter amortization period.

Payment Frequency

The payment frequency on a mortgage is the schedule at which your regular interest and principal payments are made to your mortgage. The payment frequency can be made on a weekly (52 times a year), biweekly (26 times a year), semi-monthly (24 times a year) or monthly (12 times a year) basis. Some lenders will give an option for accelerated payments on the weekly and biweekly frequencies; these are halved semi-monthly or semi-monthly payments, respectively.

Mortgage Rate 

The mortgage rate is the interest rate charged over the mortgage term. This is the agreed-upon discounted fixed or variable interest rate. A fixed mortgage rate will stay the same throughout the mortgage term.  A variable mortgage rate will fluctuate with the lender’s prime rate over the course of the mortgage term.

Mortgage Rate Term

The mortgage rate term, also known as mortgage term, is the period for which the mortgage interest rate – or the discount from prime on a variable or adjustable rate – is guaranteed. In the case of a variable mortgage rate term, the payment will stay fixed as the prime rate fluctuates, but the interest component of the mortgage payment will fluctuate. For an adjustable mortgage rate term, the total mortgage payment will fluctuate by the same factor as the interest rate as the interest component alone.

Final Thoughts 

Refinancing your mortgage can be a useful financial tool to access your home equity and save money on your monthly mortgage payments. However, before refinancing, it’s essential to understand the process and use a refinance calculator to estimate how much home equity you can access. By following the steps outlined above, you can make an informed decision about whether refinancing is the right choice for you.

Remember to research different financial institutions, gather your financial documentation, and apply for refinancing. Also, understand the different components of a refinance calculator and analyze your results to determine the best course of action. With the right information and tools, you can use refinancing to achieve your financial goals and improve your overall financial health.

---