Refinancing
Finance & Loans
Replacing your existing mortgage with a new loan, typically to get a better rate, access equity, or change loan features.
Full Explanation
Refinancing involves paying out your current home loan with a new one, either with your existing lender or a new one. Common reasons include securing a lower interest rate, switching from variable to fixed (or vice versa), accessing built-up equity, or consolidating debt. Costs include discharge fees, new application fees, and potentially break costs on fixed-rate loans.
Example
You refinance from 6.5% to 5.9% on a $600,000 loan, saving approximately $3,600 per year in interest.
Frequently Asked Questions
When does it make sense to refinance?
Refinancing is worthwhile when the interest savings outweigh the switching costs, which typically takes 1 to 2 years to recoup. Also consider refinancing when you need to access equity or your current lender cannot match competitive rates.
Does refinancing affect my credit score?
A refinance application creates a hard enquiry on your credit file, which may temporarily lower your score by a few points. Multiple loan applications in a short period have a larger impact, so it is best to be targeted.