Welcome to Remortgaging.ca. Our goal is always to provide clarity and guidance on the topic of mortgages and remortgages in the Canadian landscape. Today, we’re tackling a series of misconceptions surrounding remortgaging. Let’s set the record straight.
The world of remortgaging is riddled with myths and misunderstandings. Given the vital role that remortgaging can play in a homeowner’s financial journey, it’s essential to separate fact from fiction. Join us as we debunk some of the most prevalent myths about remortgaging in Canada.
1. Myth: Remortgaging is Only for Financially Troubled Homeowners
Reality: While remortgaging can be a solution for homeowners facing financial challenges, it’s also a strategic move for many. Homeowners often remortgage to secure better interest rates, tap into home equity, or shift from a variable to a fixed-rate mortgage.
2. Myth: You Should Always Wait for Your Current Mortgage to Mature Before Remortgaging
Reality: While breaking a mortgage early can result in penalties, sometimes the benefits of remortgaging—like securing a much lower rate—can outweigh these costs. It’s crucial to calculate potential savings against penalties before making a decision.
3. Myth: Remortgaging is a Lengthy and Complex Process
Reality: With advancements in financial technology and processes, remortgaging has become relatively streamlined. For many homeowners, the process is not much different from their original mortgage application, especially when working with a knowledgeable broker.
4. Myth: Remortgaging Will Hurt Your Credit Score
Reality: While any credit application, including remortgaging, requires a credit check which can have a short-term impact, the effect is typically minimal. Consistently making on-time payments on the new mortgage can positively influence your credit score over time.
5. Myth: Remortgaging Always Comes with High Fees
Reality: Fees associated with remortgaging vary based on the lender, type of remortgage, and individual circumstances. Some costs might include legal fees or penalty fees for breaking a mortgage early. However, many lenders offer “no-cost” or “low-cost” refinance options where some fees are rolled into the new loan.
6. Myth: Interest Rates are the Only Factor to Consider When Remortgaging
Reality: While securing a lower interest rate can result in significant savings, it’s essential to consider other factors. These include the loan term, type of rate (fixed vs. variable), fees, flexibility of the mortgage product, and potential penalties.
7. Myth: You Can Only Remortgage with Your Current Lender
Reality: Absolutely not! Homeowners are free to shop around and choose a different lender when remortgaging. Sometimes, moving to a new lender might even result in better terms and rates.
8. Myth: Using Home Equity for Debt Consolidation is Always a Bad Idea
Reality: Using home equity to consolidate high-interest debts (like credit cards) can be a smart financial move. By doing so, homeowners can lower their overall monthly payments and interest costs. However, it’s essential to ensure you don’t fall back into high debt levels post-consolidation.
9. Myth: You Can’t Remortgage If Your Home’s Value Has Decreased
Reality: While having significant home equity can open up more remortgaging options, a decrease in home value doesn’t automatically disqualify you. Depending on the remaining balance of your current mortgage and the terms you’re seeking, remortgaging might still be feasible.
10. Myth: Remortgaging is Only About Mortgages
Reality: Remortgaging can also play a role in broader financial planning. Homeowners can use it to free up funds for investments, business ventures, property upgrades, or even education.
Navigating the remortgaging landscape can be daunting, especially when bombarded with a mix of facts and myths. By debunking these common misconceptions, we hope to empower Canadian homeowners