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What does it mean to refinance my mortgage?

A refinance is when you choose to make changes to an existing mortgage. For example, when you have an existing mortgage and you want to increase that mortgage, add a home equity line of credit (HELOC) or need a second mortgage, this is called a mortgage refinance or equity take out. Sometimes we even hear the term home equity loan. These terms; refinance, home equity loan, or equity takeout, all refer to making changes to an existing mortgage or getting a second mortgage.

Here are some reasons someone might refinance a mortgage:

1. To extend your amortization, or life of your mortgage to lower a payment. This could increase cash flow that allows you invest or pay down other debts.

2. To access the equity* in a house that you own to pay down debt. We call this debt consolidation. It can reduce monthly payments and increase cash flow as well as reduce stress over your monthly budget.

3. When you want to do some renovations and have equity in your home. We can access that equity so you don’t have to use savings or charge it to a high interest credit card.

4. Maybe you want to use equity in your current home to purchase a rental property. This is also a refinance as we are refinancing your current mortgage to get you the down payment to buy a rental property.

5. If someone is going through a divorce and needs to payout their ex spouse or remove that person from the title

And sometimes a refinance accomplishes one or more of the above!

It is important to mention not everyone is in a position to refinance as you need to have a certain amount of equity in your home to qualify, among other things. Here are some of the things we look at when someone wants to refinance or do an equity take out:

  • *How much equity do you have in your property? The amount of equity is determined by how much you currently owe on a property compared to the appraised value.
  • Credit – different lenders have different guidelines on credit, some need strong credit and others will accept bruised credit
  • Employment


If you are still reading you might be wondering how you go about refinancing an existing mortgage? Here are the steps:

  1. Call a Mortgage Broker – Discuss what your goals are and what you are wanting to accomplish.

  2. Complete a mortgage application – With me, this application can be done in person, over the phone, or electronically.

  3. Choose a lender – Once we confirm you qualify we will discuss your options and pick a lender to submit your application to.

  4. Get An Appraisal - Once we have an approval, the next step is ordering an appraisal. Appraisals are generally required, this is something I order but you generally pay for.

  5. Sign Legal Documents - Once we have an approval and the appraisal is complete, you sign the legal documents, which can be signed with a lawyer or a company that will meet with you in your home (sometimes this is lender specific).

  6. Finalize Documents - Everything goes through and is finalized

FAQ

Q: How long does it take to refinance a mortgage?

It generally takes 2-4 weeks to process everything.

Q: Can I do a second mortgage instead of refinancing my first mortgage?

Depending on your situation, a second mortgage may be an option. My job is to find out what options you have and present them to you for you to decide. Sometimes the best option is to refinance and sometimes it is a second mortgage. Sometimes this is when we put a home equity line of credit in place. Again, we explore all options and go through them together

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