It used to be that a mortgage refinance on your home was a fairly simple thing to do and lenders were keen on lending you more money. However, over the past few years the rules have changed and trying to refinance your mortgage has become a little more difficult.
In this article we highlight a few key points you need to consider when applying for a mortgage refinance.
You are limited to 80% financing on a refinance
The most you can borrow against your home is 80% of its value when you already own a home. You are allowed to purchase a home with as little as 5% down (95% borrowed) however, the next day after you own it you can only borrow 80% of its value. Therefore, it is key when buying a home to assess your financial needs in the near future. You may have 20% down now but if that stretched you too thin and you may need money in the near future then it may not be wise to put so much down. You may opt for a smaller down payment to ensure you have money set aside for future needs.
Stress Test rules for a refinance
When you want to apply for a mortgage refinance you will have to qualify under the new stress test rules with most lenders. This means that you have to qualify at a rate that is 2% higher than you are actually paying. Having said that we do have some lenders that do not require you to use the stress test rules but the options are limited.
Many lenders have now tiered their rates for different products. They usually offer their best mortgage rates for high ratio purchases where there is less than 20% down on a purchase. Other than that there are usually higher rates charged for a purchase with 20% down or more. In addition, rates are usually higher for a mortgage refinance, rental property or a stated income mortgage for a self-employed borrower. It is best to contact us with your exact situation in order to get an accurate quote on rates for your situation.
If you need more information regarding mortgages or if you need any advice on your personal situation please contact our office at 604-556-3893 or email at [email protected]
For more information on our mortgage products and your preferred Abbotsford Mortgage Broker please visit our website at www.ymscanada.ca.