Mortgage Refinancing in Canada – is it Literally Now or Never?

There’s no question about it — Canadian homeowners are living with a lot of uncertainty. New Canadian mortgage rules and interest rate increases are coming fast and furious from government officials, which begs the question for those who own their home: is it time to refinance?

There are several reasons you might consider mortgage refinancing in Canada:

  1. Debt consolidation
  2. Take advantage of low interest rates
  3. To access equity

If interest rates keep rising, as economists are predicting they will in 2018, if you have a lot of debt, you could be in trouble.

The first question to ask if you’re considering mortgage refinancing in Canada is when your existing mortgage is up for renewal. What will rates be when that time comes? If they’ll be significantly higher than your current rate, refinancing could make sense.

There isn’t a firm way to predict what Canadian interest rates will be in five years, but looking at the trends they appear to be rising upwards. The Bank of Canada announced two interest rate increases in 2017 — moving the interest rate from 0.5% to 1%. That’s the first time it was raised in seven years. While the Bank has paused their hikes for now, they’re set to make more announcements over 2018. It’s possible rates will increase again.

Those with a variable-rate mortgage will be most affected if interest rates keep increasing as their mortgage is influenced by that number. So, if the interest rate goes up, your mortgage goes up. If that happened, would you be able to pay it off, or would you be in financial trouble? If the latter is your situation, locking in now at a lower fixed-rate mortgage could make sense.

It could also make sense if you carry a lot of other debt. For instance, if you have a high load of personal loans and credit card debt, if more interest rate increases come, your interest on those debts will also go up (unless you have a fixed-rate repayment schedule). Accessing more equity in your home could give you the cash you need to consolidate those debts before interest rates potentially rise again.

Prudent can help you decide if now is the time for mortgage refinancing in Canada.

Visit us at www.prudentmortgage.ca or call 416-223-9300.


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