Posted: 9 Jan '17

How To Start Thinking About Mortgage Refinancing Now

To curb a situation similar to the 2008 subprime mortgage crisis, increased rules and regulations have been imposed to ensure applicants do not default on their mortgage payments. These increased regulations may be a surprise for Albertans looking to refinance their mortgages. With that in mind, thinking ahead may put you in a better position when it’s time to renegotiate your mortgage.

Understanding Mortgage Refinancing in Alberta

The maximum equity that can be used up by borrowing in your home is typically 80-percent, meaning you retain a minimum of 20-percent equity. While this may not seem difficult, when you consider that down payments are generally between five and 10-percent, building equity over that 20-percent baseline can take years. 

Consumer Debt is a Larger Consideration Than Before

Lenders now place more importance on consumer debt to determine how an individual prioritises their debt and finances. Mortgages are stress tested now, which effectively reduces your borrowing power by impacting your debt ratio. While refinancing to pay off debt is a good way to wipe the slate clean and start over, having too much consumer debt can work against you when trying to qualify. As a general rule, it is best to avoid debt whenever possible. If you want an expert to help you analyze your debt ratio, and see if we can use the equity in your home to pay off consumer debt, give Dominion Lending Centres a call.

The Bright Side to Mortgage Financing

Housing values have increased in Alberta and many have built equity in their homes despite living there for a relatively short period. By considering your home’s current value and things that may increase your equity, you may build over that 20-percent threshold sooner than you think. 

In addition, mortgage refinancing remains viable due to interest rates remaining low. If you can get your consumer debt under control well enough to refinance, or by refinancing, you can save a considerable amount of money in interest over time and pay a lot less out of your monthly budget.

If you don't know if mortgage refinancing is a possibility for you, or you would like to learn your options so you can plan for a brighter financial future, contact us and speak to one of our Mortgage Mentors here at Dominion Lending Centres in Edmonton. We're here to help!

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