Refinancing
A refinance is a product available for property owners looking to utilize the equity in their investment. This option may be used to:
Save on interest payments
consolidate debts
Negotiate a lower interest rate
Example scenario:
Mike currently has a first mortgage of $825,000 with a LTV of 65% and wishes to renovate the flooring inside the property. For him to complete the project, the cost is estimated to be $45,000. Rather than taking on a second mortgage with a higher interest rate, Mike decides to speak with a broker who informs him of the option to refinance.
The refinance product will generally come with a lower interest rate compared to a second mortgage. This is an option that is available as the loan-to-value is not too high and the overall payments will be lower as there is only one mortgage payment instead of two. The borrower should be aware however, that refinancing will break the existing mortgage(s) and a penalty may have to be paid.