This might be the season to refinance your mortgage — here's why

With the new year just around the corner, now is the time many people start thinking about making changes. Some will consider lifestyle resolutions like diet and exercise, while others will focus on professional goals. No matter your priorities, experts agree that this year, one thing just about all homeowners can benefit from is exploring the possibility of refinancing their mortgage.

Given current conditions in the mortgage lending environment, there are many reasons to look into refinancing, even for those whose mortgages aren’t imminently up for renewal. Unsurprisingly, COVID-19 is a substantial factor at play in people’s decision to refinance.

But beyond people’s lifestyle changes, the main reason to explore the possibility of refinancing these days is the exceptionally low interest rates.

“Just to put it into perspective, in January 2020 market rates were around 2.99 per cent for five-year fixed, whereas within a year the rates have almost been reduced by half,” said Luigi Iafrancesco, a mortgage specialist at National Bank. “I’ve been a mortgage specialist for five years and these are by far the lowest rates I’ve ever seen.”

The rates are so low, in fact, that in many cases they will offset the penalty incurred by breaking your mortgage term early to refinance.

“The majority of people have mortgages with rates much higher than what they can get on the current market,” said Teddy Kyres, president of Orbis Mortgage Group. “The key would be to review their penalty with a mortgage professional, and we’re finding the majority of time if you properly calculate the penalty, it is well worth it to refinance.”

“Instead of selling their rental units and paying capital gains tax, some clients will refinance and take out the majority of their equity that way,” Kyres said. “When consulting with a tax expert, many will recommend refinancing rental properties and essentially deferring clients’ tax hit.”

With unprecedented rates available now, people need to take advantage while they can by consulting with their mortgage professionals and exploring their options.

“I think right now everyone should review their current loan,” Kyres said. “The market can change quickly, which we saw in March of this year when rates skyrocketed within a matter of weeks at the beginning of COVID-19. Whether you have a $100,000 or $1 million mortgage, the calculation does not take time and is often worth thousands of dollars in savings.”

If your mortgage is up for renewal, it’s critical to explore your options rather than simply renewing your current mortgage. This is a costly mistake made by a large portion of homeowners.

“When an institution mails out their renewal letter, it is most often not a competitive offer because they inherently know that the majority of their mortgage clients will renew without negotiating,” Kyres explained. “At renewal, clients should review their loan, as most lenders will be extremely aggressive in trying to acquire their business. Also, most of the time their legal fees are paid by the new lender and their rate is often much more competitive. This can translate into thousands in savings for clients.”

No matter your situation, speaking with an expert is essential when making decisions about your mortgage.

“Once you evaluate your goals, you can decide whether refinancing your existing mortgage loan makes sense,” Campoli said. “Whether you’re buying a home, renewing or refinancing, it’s a good idea to speak with a mortgage adviser who can help guide you through the process and answer your questions, so that you can make decisions that are right for you and your family.”

Each client’s mortgage and lending profile is different and should be treated as such, added Iafrancesco.

“There is no cookie-cutter solution,” he said. “It is definitely something that should be analyzed on a case-to-case basis.”

Moreover, seeking professional guidance can result in savings clients weren’t even aware were possible, Kyres added.

“Given the fact that the Autorité des marchés financiers (AMF) now governs mortgage brokers, our services have been brought to the next level in terms of the analysis that must be performed on every client’s lending options,” Kyres said. “Mortgage brokers must now work in the same way as financial planners and advisers in assessing all lending needs and properly delivering the correct product.”

The result? A more comprehensive experience for clients, and one that can result in substantial savings.

But how long will low rates last? That’s difficult to predict.

“What I can say for sure is that now is the best time in history to acquire a mortgage,” Kyres said. “Going forward, I believe rates will stay low for a while; however, this is not guaranteed. I would say it’s in everyone’s best interest to explore refinancing options now with their mortgage professional.”