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Mortgage rates are currently lower than ever, which is good news for homebuyers.
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But if you already own a home and have a mortgage, you can also take advantage of these record rates, even if your current loan is only one year old.
Refinancing at one of today’s ultra-low rates can save you thousands of dollars a year in interest and tens of thousands of dollars over the course of your loan.
Here are four tips to make sure you get the best possible rate for a refi.
1. Make sure refinancing is the right move
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The whole point of refinancing is to save money, so you need to make sure you move on after covering the cost of the transaction.
Some of the typical refi costs include legal fees ($ 700 to $ 1,000), mortgage registration fee (about $ 70), and liquidation (up to $ 400) if you happen to change lenders.
You will also be subject to an early termination penalty for early termination of your existing mortgage, which can cost up to 4% of your total loan.
It may seem like a lot, but with rates always low, you’re probably still saving thousands, even with the high cost. Do homework first to confirm that a refi is the right long-term choice.
2. Read the fine print
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Before you fixate on an insanely low price you’ve seen in the news, take a moment to look beyond the stock. Not everyone can get such a rate, and maybe you don’t want it either.
Some advertised rates only apply to high percentage borrowers who pay extra for standard mortgage insurance. Some may require a commitment for a term that won’t work for you.
Also, no-frills mortgages can have limitations. Your new contract may not have prepayment rights, transferability, or be excessively expensive to terminate early.
So don’t assume your new mortgage will work like your old one. As you search for a low rate, pay attention to the details and think about which features are important to you.
If examining the fine print is stressing you out, there are free services like Canada Loans that compare rates from Canada’s top lenders and find the best available loan based on your specific needs.
3. Be prepared to act fast
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The economy of the COVID era is unstable; as a result, today’s big deals won’t last long. The sooner you have all your information in order, the faster you can set your rate.
Here’s a to-do list for documents so you’ll be prepared when your lender asks:
Check your credit score – a high score will help you qualify for the best rates.
Have your current lender’s most recent statement on hand.
Collect pay slips, bank statements, and a business letter to prove you’re on the payroll.
Round up your tax returns and assessments from the past two years as proof of income.
Prove that your property tax payments are up to date.
4. Prepare to break up with your lender
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Loyalty is fine, but statistics say it’s best not to be married to your lender.
Businesses know you don’t want to waste time shopping and take advantage of it. A Canadian government agency, the Office of the Superintendent of Financial Institutions, found that lenders offer their repeat customers rates that are on average 0.09% higher than those available elsewhere.
Even that difference – applied to a $ 400,000 mortgage with a 20-year amortization of 2.25% versus 2.34% – would save you $ 1,651 in interest in five years. But this is only the average.
As with anything, it’s worth looking around. To save time, you can use Canada Loans to find the best rate for your specific financial situation.
Even if you’re just curious about how much you can save, the tool below will give you a free quote:
This article was created by Wise Publishing, Inc., which provides clear and reliable information that people can use to take control of their finances. Millions of readers across North America rely on the Toronto-based company to help them save money, find the best bank accounts, get the best mortgage rates, and handle many other financial matters.
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