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The Mortgage Checklist - Part 4 (Refinancing)

If you're applying for a mortgage, there are some things you will need to know.  As a result, we have created a mortgage checklist, so you can ask your lender/broker the right questions.  Here is part 4 of 9, featuring questions about refinancing.

Refinancing

19. Is there any restriction on when I can refinance?

20. Can I increase my mortgage at any time, at fully discounted rates, and without paying any penalty?

This is vital if you need to refinance or buy a more expensive home.

Some lenders have a policy of charging penalties, or not giving you the best rates when you increase your mortgage.

 21. Can I extend my mortgage term at any time without penalty, and at fully discounted rates?

This is useful if rates drop and you want to blend your rate with the new lower rate (which lowers your payment). It's also key if you're past the middle of your term and you want to mitigate the risk of higher rates at renewal.

Beware of lenders that let you "blend and extend" but then bake a prepayment charge into your new mortgage rate.

22. Is your mortgage readvanceable?

Readvanceable mortgages let people with at least 20 per cent equity re-borrow principal that they've previously paid off. This feature usually involves a credit line linked to your mortgage. Readvanceables are good low-cost sources of funds for investment opportunities, a small business, renovations and so on. Readvanceables also let you pre-pay your mortgage without the fear of not having cash on hand in an emergency. Some people even use them as an alternative to a contingency fund.

There are two types of readvanceables: manual (where you must apply to re-borrow paid-down principal) or automatic (where every principal payment is instantly available to you if you need it).

23. Can I roll in my refinance or switch costs to the new mortgage?