Need your advice on refinancing a mortgage

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May 6th, 2020 8:27 am

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Apr 30th, 2020 9:26 pm

bubbletx [OP]: Newbie; Feb 8, 2009; 7 posts; Brampton

Apr 30th, 2020 9:26 pm

Need your advice on refinancing a mortgage

I am looking for some advice and hope you can help. I have a mortgage with a variable interest rate of 1.6% (the rates went down recently) with a 17 year amortization. I am considering refinancing in order to consolidate debt of $36,000 into the mortgage. However banks are offering between 2.79 to 2.85% interest rate for the refinancing at 25 years amortization. And if I’m to refinance, it means my interest rate would move from 1.6% to 2.85%. Would you advise me to do the refinance and move to the higher rate of 2.85% for my mortgage? The $36,000 debt is a combination of mostly LOC (6.7%) and credit card debt. There is an additional option of refinancing and taking out an additional $30,000 for renovations making the total $66,000.

What would you do: do not refinance - it is foolhardy to move from 1.6% to 2.85% OR refinance to 2.85% and consolidate the $36,000 OR refinance to 2.85 % with the additional $66,000 that incorporates renovations and debt?

8 replies

Apr 30th, 2020 10:23 pm

vkizzle: Deal Expert; Aug 22, 2011; 40507 posts; 28180 upvotes; Center of Universe

Apr 30th, 2020 10:23 pm

HELOC?

+1

Apr 30th, 2020 10:23 pm

bomber17: Deal Fanatic; Apr 5, 2016; 6099 posts; 4591 upvotes; Calgary/Vancouver

Apr 30th, 2020 10:23 pm

Is your mortgage up for renewal? If it's not, keep in mind you also have to pay a penalty. How many more months remaining on your current mortgage? I'm assuming 2.79/2.85 is fixed rate? Can probably negotiate that down to 2.6-2.7%.

Depending on those factors, might even be a good idea to just get a HELOC separate from the mortgage. Anyone can easily get you Prime+0.5%, if you have a strong relationship with your lender, push for prime.

+1

Apr 30th, 2020 10:42 pm

TuxedoBlack: Deal Addict; Jul 8, 2013; 4027 posts; 6381 upvotes; Somewhere in AB

Apr 30th, 2020 10:42 pm

It's a simple math question that depends upon your current mortgage balance. What's your mortgage balance right now?

And as @vkizzle said earlier, it makes more sense to get a HELOC at Prime + 0.5 for the $36K balance rather than to roll it in the mortgage. You have a super sweet rate: enjoy it.

"You don’t need to sacrifice stability, common sense, and comfort if a 1% bond still lets you achieve your financial goals." M. Housel

May 1st, 2020 11:49 am

bubbletx [OP]: Newbie; Feb 8, 2009; 7 posts; Brampton

May 1st, 2020 11:49 am

Thanks for your reply. No my mortgage isn't up for renewal. I have 17 more years on the mortgage. Part of the offer from some banks if I move the mortgage to them is that they will pay off the penalty or half of it. I am not able to get a HELOC from the mortgage company I am with - they do not offer HELOCs just strictly mortgages.

I am really trying to consolidate the debt to take advantage of lower interest rates in the current climate.

May 1st, 2020 12:53 pm

TuxedoBlack: Deal Addict; Jul 8, 2013; 4027 posts; 6381 upvotes; Somewhere in AB

May 1st, 2020 12:53 pm

bubbletx wrote: ↑ Thanks for your reply. No my mortgage isn't up for renewal. I have 17 more years on the mortgage. Part of the offer from some banks if I move the mortgage to them is that they will pay off the penalty or half of it. I am not able to get a HELOC from the mortgage company I am with - they do not offer HELOCs just strictly mortgages.

I am really trying to consolidate the debt to take advantage of lower interest rates in the current climate.

Get HELOC from another lender as a second position. It'll be cheaper than to let go of your current mortgage rate. Again, what's your mortgage balance?

"You don’t need to sacrifice stability, common sense, and comfort if a 1% bond still lets you achieve your financial goals." M. Housel

+1

May 4th, 2020 3:37 am

bomber17: Deal Fanatic; Apr 5, 2016; 6099 posts; 4591 upvotes; Calgary/Vancouver

May 4th, 2020 3:37 am

bubbletx wrote: ↑ Thanks for your reply. No my mortgage isn't up for renewal. I have 17 more years on the mortgage. Part of the offer from some banks if I move the mortgage to them is that they will pay off the penalty or half of it. I am not able to get a HELOC from the mortgage company I am with - they do not offer HELOCs just strictly mortgages.

I am really trying to consolidate the debt to take advantage of lower interest rates in the current climate.

17 years is the amortization, not the term. Term is shorter where you pick 1, 2, 3, 4, 5, or 10 year terms for fixed and variable rates. You can break the amortization without penalty, but the term does unless you are in an open term.

May 6th, 2020 1:03 am

ejohan: Sr. Member; Oct 12, 2005; 788 posts; 694 upvotes; Vancouver

May 6th, 2020 1:03 am

TuxedoBlack wrote: ↑ Get HELOC from another lender as a second position. It'll be cheaper than to let go of your current mortgage rate. Again, what's your mortgage balance?

+1 TD and Simplii both offer second position HELOCs (there may be others?). Second position = keep your existing mortgage and rate intact.

May 6th, 2020 8:27 am

Shaner: Deal Expert; Jul 5, 2004; 27336 posts; 6709 upvotes

May 6th, 2020 8:27 am

You really need to do the math. How much are you paying in interest every month on your unsecured debt? Are you struggling to pay it off? Do you anticipate being able to pay it off at all or will it be hanging over your head for the foreseeable future?

If so, do the math with the new interest rate, penalty, lawyers costs, home appraisal, etc. and see what the break even point is. You don't have a high amount of unsecured debt, so I can't imagine a refinance being the better solution in this case, not with your current low rate. So unless you're really struggling to pay it off, I would suggest looking at a HELOC from another bank or work hard to pay off the debt and don't touch your mortgage.

You can also try phoning your bank and asking for a lower interest rate

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