Capital Mortgages opened in January 1999 and has since serviced thousands of clients and arranged several billion dollars in mortgages in Ottawa area.

What To Know About Re-Financing Your Mortgage Throughout COVID-19

The ongoing pandemic has thrown all of us for a loop, with many people either being temporarily laid off, having their salaries cut or being let go altogether. It’s a scary and unprecedented time that is leading a large percentage of Canadians to consider whether they should refinance their mortgages. Doing so will allow them to give themselves a safety net by potentially resetting their rate to be lower, reducing their payments or pulling out equity from their homes in the event of job loss.

Here are a few factors you should keep in mind when planning to refinance your mortgage:

  1. Refinances are not urgent for lenders – Your refinance request will be a third priority (or lower) for lenders after new purchase and lender switches. Coupled with the high demand for refinancing right now, keep in mind that it might take a lender longer to reply on your application.
  2. You may be required to pay a penalty – You’ll have to pay a penalty if you break an existing closed mortgage to refinance. These fees can range from $1,000 to several thousand dollars – check your mortgage contract to determine how your lender will calculate your penalty. Here is a helpful list of penalty calculators by major lenders. 
  3. Employer verification will be strict – Given the situation we’re currently living through, your lender might make you prove that you will not be laid off during the economic shutdown if you don’t work a job that has been deemed to be essential
  4. Fluctuating ratesKeep in mind that mortgage rates are fluctuating often right now, even though the Bank of Canada slashed its overnight rate in March. Make sure you’re not overpaying for a fixed or variable mortgage and consider a cheap shorter term if you’re able to find one. Rates will likely return to normal once we’re through the worst of the pandemic.
  5. Opt for a home equity line of credit – A HELOC is a great alternative to using credit cards for a source of emergency liquidity. Payments are usually interest-only and you can generally borrow at your lender’s prime rate plus a variable of approximately +0.5% to 1%, versus the higher interest rates of credit cards. Note that you’ll need an excellent credit score and stable employment to be approved.

 

Refinancing your home can be a complex decision when considering all of the factors involved. Don’t hesitate to give us a call at 613-228-3888 if you require more clarity on your mortgage’s details, we’d be happy to walk you through it.

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