Refinancing a home is to, of course, access the equity you have built up. Reasons you might do this are to buy an investment or vacation home, have money available to put as a down payment on a new residence, catch up on your RRSP's, etc…
When can I refinance my home?
The answer, almost anytime, as long as it fits within your borrowing capacity and there is enough equity to refinance with. A common myth is that you can only refinance at the maturity of your current mortgage term. Most of the time this is not the case. You should be able to refinance anytime during the term.
Here are some options if currently in a fixed mortgage term:
1. You can blend the rate with today's rates for the new portion of money that you would be taking out. As rates are so low now this could be quite beneficial especially if you're in a fixed term with a higher rate from a few years ago.
2. You could look to see if it would be beneficial to break that term and go with a lower variable. This option is all about the math but basically if you're going to save more interest than you would pay in any breakage fees then it may make sense to do so.
3. You could also add a new mortgage segment if you are approved for a Home Equity Loan/Mortgage. For example you could take a Variable rate mortgage term for the new money borrowed. You would do this for potential interest savings and also to hedge against the ups and downs of interest rates over the life of your mortgage.
Keep in mind you can only take advantage of # 3 with certain Home Equity Loans and only up to 80% of the current value of your home. One of them being the RBC Homeline Plan. With this plan you can split your mortgage balance between fixed and variable.
You would also have access to a secured line of credit at Prime + .50% which is a full 1/2 percent below most other banks. Just this 1/2 percent difference could save you thousands of dollars in interest depending on the balance.
Anyone's head spinning yet. As you can see there are numerous options available just for this one scenario. Your mortgage planner should be able to, not only, provide the options but also advise you on which one make the most sense for you and would benefit the most from.
If you have any questions regarding this info or any other scenarios you want to discuss please feel free to contact me anytime
Tony Marchigiano | Mortgage Specialist| Royal Bank of Canada | T. 604-505-7109 | F. 778-737-0054