6 Reasons to Refinance your Mortgage
Diane Buchanan • March 3, 2021
Is now a good time to refinance your mortgage? Well, maybe! Interest rates are very low right now, and according to the bank of Canada, they will most likely remain low until at least 2023. So while everyone has different reasons to access their home equity, to a maximum of 80% of the property value, here are 6 reasons refinancing your mortgage might make sense to you.
Your mortgage is up for renewal anyway.
If your mortgage is up for renewal and you’re looking at a new term anyway, this is the perfect time to consider adding money to the balance outstanding as there won’t be a cost to break your existing mortgage. Breaking your mortgage mid-term will incur a penalty. Waiting until your term is up won’t.
It lowers your overall cost of borrowing.
The goal with any mortgage is to pay the least amount of money back to the lender as possible. When considering your mortgage options at the outset, this might mean taking the mortgage with the lowest rate, while it might also mean paying a little higher rate in favour of more flexible terms. It’s all about calculating the best option for you at that time.
When considering a refinance, it’s very similar. You should consider breaking your term anytime and paying the penalty if the terms on the new mortgage can save you more money in the coming years.
These aren’t calculations you can easily make on your own. However, in talking with an independent mortgage professional, you should be able to clearly assess if breaking your current mortgage will save you money in the long run.
To consolidate all your debts into one payment.
Life happens. Sometimes a financial reset is in order. If you have high-interest unsecured debt that is eating up your cash flow, bringing everything into one low payment secured by your mortgage could be a great option for you. Not only does this option give you breathing room in your daily life, but it will also help to protect your credit score if you are at risk of missing payments.
Debt restructuring is probably one of the most common reasons people refinance their mortgages.
To increase the value of your home.
Home renovations can be expensive. Saving up to renovate properly can take a long time. The idea of using your home equity to pay for renovations upfront, especially ones that increase the overall value of your home, can make a lot of financial sense.
Also, with more Canadians working from home due to the changes brought about by COVID-19, adding a home office or finishing a basement to increase the livable space in your home might be a great reason to refinance.
To build wealth through investing in property.
Purchasing a rental property can be a great way to build long term wealth. Although there can be some hassle involved in dealing with renters, having a tenant cover the mortgage cost as the property appreciates can be profitable long term.
Depending on your situation, purchasing a condo for your kids while they attend school is another option to invest in property. And while a vacation home might cost you financially, it can be considered a solid investment in your lifestyle.
If you have significant equity, consider a refinance of your existing property to come up with the funds or downpayment require to purchase another property.
Because you can do whatever you want with your money.
The equity you’ve built up in your home is money you have. However, to access that money, you'll either have to sell your home or borrow against it. And as it’s cold in Canada in the winter, having a home to live in is a good idea. So, if you’re looking to refinance your mortgage to access your equity, do it for whatever reason you like.
Maybe you want to start a new business, maybe you want to help a family member through hard times, maybe you want to help your kids pay for their education, or maybe you want to buy a Harley. The truth is, it doesn’t really matter what you do with the money, as long as you pay the lender back what you borrowed plus the interest.
Of course, with that said, some reasons to refinance might be a little bit better than others, but you can weigh the financial cost accordingly. However, as rates are really low right now, depending on the terms of your existing mortgage, a refinance might make sense.
If you’d like to talk about what a refinance looks like given your existing mortgage and financial situation, let’s do a cost/benefit analysis together. Please contact me anytime.
How to Use Your Mortgage to Finance Home Renovations Home renovations can be exciting—but they can also be expensive. Whether you're upgrading your kitchen, finishing the basement, or tackling a much-needed repair, the cost of materials and labour adds up quickly. If you don’t have all the cash on hand, don’t worry. There are smart ways to use mortgage financing to fund your renovation plans without derailing your financial stability. Here are three mortgage-related strategies that can help: 1. Refinancing Your Mortgage If you're already a homeowner, one of the most straightforward ways to access funds for renovations is through a mortgage refinance. This involves breaking your current mortgage and replacing it with a new one that includes the amount you need for your renovations. Key benefits: You can access up to 80% of your home’s appraised value , assuming you qualify. It may be possible to lower your interest rate or reduce your monthly payments. Timing tip: If your mortgage is up for renewal soon, refinancing at that time can help you avoid prepayment penalties. Even mid-term refinancing could make financial sense, depending on your existing rate and your renovation goals. 2. Home Equity Line of Credit (HELOC) If you have significant equity in your home, a Home Equity Line of Credit (HELOC) can offer flexible funding for renovations. A HELOC is a revolving credit line secured against your home, typically at a lower interest rate than unsecured borrowing. Why consider a HELOC? You only pay interest on the amount you use. You can access funds as needed, which is ideal for staged or ongoing renovations. You maintain the terms of your existing mortgage if you don’t want to refinance. Unlike a traditional loan, a HELOC allows you to borrow, repay, and borrow again—similar to how a credit card works, but with much lower rates. 3. Purchase Plus Improvements Mortgage If you're in the market for a new home and find a property that needs some work, a "Purchase Plus Improvements" mortgage could be a great option. This allows you to include renovation costs in your initial mortgage. How it works: The renovation funds are advanced based on a quote and are held in trust until the work is complete. The renovations must add value to the property and meet lender requirements. This type of mortgage lets you start with a home that might be more affordable upfront and customize it to your taste—all while building equity from day one. Final Thoughts Your home is likely your biggest investment, and upgrading it wisely can enhance both your comfort and its value. Mortgage financing can be a powerful tool to fund renovations without tapping into high-interest debt. The right solution depends on your unique financial situation, goals, and timing. Let’s chat about your options, run the numbers, and create a plan that works for you. 📞 Ready to renovate? Connect anytime to get started!
Owning a vacation home or an investment rental property is a dream for many Canadians. Whether it’s a cottage on the lake for family getaways or a rental unit to generate extra income, real estate can be both a lifestyle choice and a smart financial move. But before you dive in, it’s important to know what lenders look for when financing these types of properties. 1. Down Payment Requirements The biggest difference between buying a primary residence and a vacation or rental property is the down payment. Vacation property (owner-occupied, seasonal, or secondary home): Typically requires at least 5–10% down, depending on the lender and whether the property is winterized and accessible year-round. Rental property: Usually requires a minimum of 20% down. This is because rental income can fluctuate, and lenders want extra security before approving financing. 2. Property Type & Location Not all properties qualify for traditional mortgage financing. Lenders consider: Accessibility : Is the property accessible year-round (roads maintained, utilities available)? Condition : Seasonal or non-winterized cottages may not meet standard lending criteria. Zoning & Use : If it’s a rental, lenders want to ensure it complies with municipal bylaws and zoning regulations. Properties that fall outside these norms may require financing through alternative lenders, often with higher rates but more flexibility. 3. Rental Income Considerations If you’re buying a property with the intent to rent it out, lenders may factor the rental income into your mortgage application. Long-term rentals : Lenders typically accept 50–80% of the expected rental income when calculating your debt-service ratios. Short-term rentals (Airbnb, VRBO, etc.) : Many traditional lenders are cautious about using projected income from short-term rentals. Alternative lenders may be more flexible, depending on the property’s location and your financial profile. 4. Debt-Service Ratios Lenders use your Gross Debt Service (GDS) and Total Debt Service (TDS) ratios to determine if you can handle the mortgage payments alongside your other obligations. With investment or vacation properties, lenders may apply stricter guidelines, especially if your primary residence already carries a large mortgage. 5. Credit & Financial Stability Your credit score, employment history, and overall financial health still matter. Since vacation and rental properties are considered higher risk, lenders want reassurance that you can handle the additional debt—even if rental income fluctuates or the property sits vacant. 6. Insurance Requirements Rental properties often require specialized landlord insurance, and vacation homes may need coverage tailored to seasonal or secondary use. Lenders will want proof of adequate insurance before releasing mortgage funds. The Bottom Line Buying a vacation property or rental can be exciting, but financing these purchases comes with extra rules and considerations. From higher down payments to stricter property requirements, lenders want to be confident that you can handle the responsibility. If you’re considering a second property, the best step is to work with a mortgage professional who can compare lender requirements, outline your options, and find the financing that works best for you. Thinking about making your dream of a vacation or rental property a reality? Connect with us today.
