First, to clarify, the most common form of mortgage refinancing involves paying out an existing mortgage with the funds provided by a newly created mortgage now registered against the same property.

The new mortgage can be for a greater amount than the previous mortgage.  The additional funds can be used for almost any purpose.  Just remember that there will need to be sufficient equity in the property to allow for an approval of the higher mortgage amount.

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At the time of writing in January of 2010, mortgage rates are at or near record lows with the potential for rate increases from this point forward more likely than further interest rate drops.  So one of the main reasons for mortgage refinancing is to secure a lower interest rate that will allow you to reduce your interest costs over time. The decision to do so is driven by the economic benefit of paying less interest.

Another main reason for mortgage refinance is to consolidate debt. In this situation, the new mortgage will be approved for a larger amount than the old mortgage being paid out and the additional funds acquired will be used to pay down other debts that the borrower holds.  The key benefits of this refinancing action is that the weighted average interest rate of the collective debt will be reduced and debt repayment will be spread out over a longer period of time.  Mortgage refinance related to debt consolidation is a powerful method to elminate costly short term consumer financing that can drain available cash flow and destroy personal credit.

While debt consolidation is by far the biggest reason for securing additional funds through refinancing, there are many other uses of funds that can motivate a home owner to refinance their mortgage.

This is not ment to be an exhaustive list, but other uses of additional funds are for such activities as investing in a stock portfolio, financing the acquisition of investment property, financing your educational costs or those of a family member, home renovations, mortgage consolidation of two or more mortgages registered against the same property, and so on.

As the equity in your home grows, so does your potential access to funds for a wide variety of purposes.

To make sure that you’re getting the best value out of your mortgage for the least amount of cost, I recommend that you give me a call at least once a year so that we can review your mortgage against the market to see if there are any opportunities to lower your cost of borrowing and/or improve your repayment terms.  And if you’ve got other financing requirements that could benefit from a Canadian mortgage refinancing, we can certainly discuss those as well.

Click Here To Speak With Joe Walsh, Mortgage Refinancing Specialist.

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