Refinancing Does Come At A Cost.
Lawyer Costs
When you want to refinance, you must perform this with a lawyer. This lawyer can be provided by the Licensed Mortgage Broker/Agent, or you can choose your lawyer. Furthermore, you can select FCT or FNF ( transaction management service providers).
Interest Rate Difference
You may be thinking of refinancing into a lower-rate market. Breaking this contract will impact your penalties from the current lender if you do not stay with them. If you are refinancing into a higher-rate environment, a 3-month penalty typically gets applied. However, your full mortgage payment will be affected as the rate has increased. Always budget or discuss this scenario with a licensed Mortgage Broker/Agent
Penalties
Consequently, when rates are lower than your current contract mortgage rate, and you break this contract, hefty penalties will be applied. This penalty is usually calculated by an I.R.D ( interest rate differential). Smaller penalties are applied when your rate is very low and you want to exit the mortgage. Other penalties can be reinvestment fees, document preparation from lenders, lender lawyer fees, and lender administration fees.
Net Positive Gain
When you refinance when the costs can add up. Ultimately, it needs to make sense to touch the title of your home and possibly pay higher rates. You can always have a refinance analysis performed to see if it makes sense to alter your mortgage or wait until a future date. A Licensed Mortgage Broker/Agent can always perform this analysis.
Time
Finally, no matter what anyone says, you should always meet and discuss your plans to refinance. Refinancing takes time. Meeting your lawyer takes time. Always plan ahead of time so that you are not rushed and sign documents quickly on closing. Take the time to perform a review. Understand your numbers and what the costs are. At Mortgage Suite, we produced a Simple guide to refinancing to help.
