De Krupe Law
What Is Mortgage Refinance?
Mortgage refinancing is a complicated and time-consuming process that involves legal and financial aspects. That’s why it’s essential to have a professional by your side who can explain the process and protect your interests. Our knowledgeable De Krupe Law mortgage refinance lawyer takes full responsibility to carefully guide you through the mortgage refinance and complex processes of purchasing and owning property in Toronto, Vaughan and many other locations.
A mortgage is a legal agreement between a borrower and a lender where the borrower pledges a property as collateral for a loan. This loan is typically used to purchase a property or to refinance an existing mortgage. The borrower agrees to make regular payments to the lender over a predetermined period, usually 15 to 30 years, until the loan is paid in full.
Mortgage refinancing process, in turn, includes getting a new mortgage to replace the existing one or using other methods to make your monthly payments lower. It can help you reduce your interest rate and allow you to access your home equity.
When Should You Refinance a Mortgage?
Negotiating even a 1% reduction in the interest rate on your mortgage can be worthwhile. But for that, you must be ready to pay the penalty costs, if there are any in your contract. Mortgage refinance may be beneficial to you if:
- You want to reduce your regular monthly payments
- There is a mounting debt you want to avoid or to pay down
- You are interested in getting access to your home equity
- There is another property you want to buy by taking out a second mortgage
If you are eager to avoid a vicious cycle, it is important to exercise caution when considering refinancing your mortgage to pay down mounting debt. Transferring the amounts you owe on high-interest credit cards and mid-interest lines of credit to the lower-interest mortgage, you may end up facing newly mounting debt once you pay off the legal costs and penalties and are faced with higher monthly payments on the mortgage.
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What Options are Available for Mortgage Refinance
Refinancing a mortgage is when you replace an existing mortgage with a new one, usually at a lower interest rate, or changing the terms of the existing mortgage. Here are some beneficial options that our skilled mortgage refinance lawyer can negotiate for you:
Home Equity Line of Credit (HELOC)
A home equity line of credit, or HELOC, is a type of revolving credit line secured by your property that allows homeowners to access equity in their home. HELOCs typically have a lower interest rate than credit cards or personal loans, and interest is only charged on the amount borrowed.
Cash-out Refinance
A cash-out refinance involves refinancing your mortgage for more than you currently owe and taking the difference in cash. Cash-out refinancing typically has a higher interest rate and shorter repayment term than a conventional mortgage refinance.
Conventional Mortgage Refinance
A conventional mortgage refinance involves refinancing your mortgage through a traditional bank or lender by taking a new mortgage. It typically involves a lower interest rate and longer repayment terms, which can lower monthly payments. It is one of the most flexible options, you can:
- Change your lender or stay with the same one
- Move from a variable rate to a fixed-rate mortgage of vice-versa
- Change the frequency of payments (e.g bi-weekly and weekly payment options)
- Negotiate a reduction of the mortgage penalties
You should also ask your real estate lawyer about the demands a new mortgage closing might have, such as paying off all of your existing debt. All cases are individual, that is why it is crucial to know complete information from both sides: borrower and lender.
Specialty Mortgage Refinance Programs
There are several specialty mortgage refinancing programs available in Ontario, including the Home Affordable Refinance Program (HARP) and the Home Affordable Modification Program (HAMP). These programs are designed to help homeowners who are struggling to make their mortgage payments and are facing foreclosure. These programs are offered by the government and have specific eligibility requirements.
Tax Implications and Legal Fees Required for Mortgage Financing
When it comes to tax deductions, mortgage interest payments are generally not eligible, except for instances where the home is generating income from being rented out. However, if you operate a small business from your home, there are many business expenses that can be deducted, we suggest you always talk to your accountant or a mortgage refinance lawyer.
If you are considering mortgage refinancing, it is important to note that there are additional fees and payments involved, such as:
- Payment for the real estate lawyer’s services
- Disbursements
- HST
- Title Insurance
- Credit card-type debts (if it is required to take a new mortgage)
There are two types of mortgages: open and closed. Open mortgages are not subject to any penalty when paid, while closed mortgages are subject to penalties if they are paid off before the end of the mortgage maturity period (unless otherwise specified by your commitment). The penalty amount is usually the higher of the interest rate differential or interest for three months. In variable rate mortgages, the penalty is usually three months’ interest. Read more info on how to accelerate your mortgage payment and don’t pay fees for it in our blog.
Our experienced mortgage refinance lawyer handles any refinancing issues efficiently and quickly. We can close your refinance within days. However, some delays can be caused by the bank processes or other circumstances. Our experts always stay in touch with you to provide you with necessary information and discuss which actions are required.
Why Do You Need a Mortgage Refinance Lawyer?
With thousands of successful transactions in real estate law, our team of experts has the knowledge and expertise to handle all aspects of real estate transactions, including mortgage refinancing.
- Your Bank/Lender may require you to have one to represent you and the Bank
- Handle all necessary paperwork and reduce the amount of time, wasted on the documents, by registering some of them electronically
- Double Check both sides requirements to eliminate the possibility of you being scammed
- Perform property title searches to check for financial liens
We understand the complexities of the process and work tirelessly to ensure that our clients receive prompt and efficient services to meet their needs.
Factors to Consider When Applying for Property Insurance
When it comes to mortgage financing, property insurance is a crucial consideration that lenders take into account before providing financing. To determine the right amount of property insurance, four factors need to be considered:
It is advisable to use a guaranteed replacement cost endorsement if the mortgage balance is less than the replacement cost of your home. This should be considered in all cases where you own your property with a clear title. If your property is over 20 years old, an endorsement to your policy may cover the cost of rebuilding to meet the higher standards introduced by new building codes.
For all insured mortgages, specified costs can be deducted from the mortgage advance by the mortgage lender:
- Appraisal fees
- Interest adjustments
- Property taxes held
- Provincial sales tax portion of the mortgage insurance premium
What Else You Should Know About Mortgage Refinance
As a purchaser, it is your responsibility to confirm and arrange the mortgage financing required to complete the purchase transaction. Here two steps that you must perform:
- Successfully clear all lender requirements for income, debt obligations, and cash down payment proofs within the timelines to avoid delays on the closing day;
- Ensure that mortgage regulations and instructions are sent to the real estate lawyer by the mortgage lender to finalize the mortgage financing processing, and that the requisite mortgage funds needed for the closing are obtained.
If a buyer selects to have a mortgage pre-approval before purchasing the property, it should be obtained in writing. The terms and conditions of the mortgage and the pre-approval should be clearly outlined.
In cases where a power of attorney is used in the purchase transaction, it needs to be pre-approved by the mortgage lenders.
It is advisable that an Agreement of Purchase and Sale should be made conditional in cases where financing is required. The agreement should be based on the financing terms and conditions confirmed in writing by the institutional lender.
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How We Can Help
At De Krupe Law, we believe in providing a personalized and attentive approach to our clients. We work tirelessly to deliver comprehensive real estate services not only to our real estate clients but also to our family law, corporate law, and wills and estates clients. Our team of highly skilled lawyers is always available to answer your specific questions directly.
Contact us today to learn more about how we can assist you in your real estate deals, including mortgage refinancing, and other related transactions. We are committed to providing prompt, reliable and efficient legal services to meet all your real estate needs.