With refinancing, you are taking out a second mortgage on an asset that’s already been mortgaged in the past and one which you are still in the process of paying off. Refinancing may give you the means to access readily available cash, but this is not reason enough to take out a second mortgage. For refinancing to work to your advantage, you need to be aware of how it works and which situations best require it.
Why a Mortgage Refinance Loan in Toronto May Not Work
Refinancing is not always the solution to your financial problems. The situations below are just a few examples of when refinancing might not be the best action you can take.
Low Current Market Value
If the current market value of your mortgaged asset is lower than the amount it has been assessed for your existing mortgage, a mortgage refinance loan will only serve as a bigger financial setback. Because of its reduced value, you might not be able to qualify for the best mortgage refinance rates. This is especially true if you’re also determined to refinance up to eighty percent of the current market value of your property.
Existing Long-Term Loan
If your existing mortgage has a loan term of thirty years and you’ve already paid off a third or more than half of it, refinancing with a new 30-year mortgage might not be the best deal for you. After all, you’ve already reached the latter stage of your existing loan. You’ll only need a comparatively shorter period of time to pay it off completely. A new mortgage refinance loan in Toronto, on the other hand, will require you to start all over again and possibly make do with higher interest rates.