Refinancing should begin with a clear purpose and a complete estimate. Use this checklist to compare the change with the option of waiting.
1. Record the result you need
Write the amount you want available after costs and the intended use. Ask whether the proposed loan figure includes amounts needed to pay out existing obligations. Gross borrowing and money available to spend are not the same number.
2. Request an itemised estimate
Ask for each applicable lender, brokerage, legal, appraisal, discharge and prepayment charge to be identified. Mark who receives it, when it is paid and whether it is added to the borrowing. Ask for dated figures because a payout estimate can change.
3. Compare over a useful time period
Choose a comparison period that reflects how long you expect to keep the mortgage. Compare payments, fees and the balance still owing at that point. A monthly payment reduction alone does not establish that the transaction saves money.
Questions to bring to our conversation
- How much would actually be available after costs?
- Which charges are financed and accrue interest?
- What changes if I wait until renewal?
Further reading: FCAC: Borrowing against home equity. General information; lender requirements and individual circumstances vary.
Worked example: borrowing is not the same as cash available
| Item | Amount |
|---|---|
| New mortgage | $500,000 |
| Existing mortgage payout | − $420,000 |
| Other debts paid at closing | − $30,000 |
| Assumed total transaction charges | − $5,000 |
| Cash left from these assumptions | $45,000 |
The difference between the two mortgage amounts is $80,000, but only $45,000 remains after the assumed debt payouts and costs. Actual charges, accrued interest and closing adjustments can change the result. Confirm all amounts with the professionals handling the transaction.