Personal Finance

Need your advice on refinancing a mortgage

  • Last Updated:
  • May 6th, 2020 8:27 am
[OP]
Newbie
Feb 8, 2009
7 posts
Brampton

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
Deal Expert
Aug 22, 2011
35247 posts
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Center of Universe
HELOC?
Deal Fanatic
Apr 5, 2016
5050 posts
3581 upvotes
Calgary/Vancouver
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.
Current Fido and Rogers customer.
Ex Koodo customer.
Deal Addict
Jul 8, 2013
1584 posts
1898 upvotes
Red Deer, AB
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.
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[OP]
Newbie
Feb 8, 2009
7 posts
Brampton
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.
Deal Addict
Jul 8, 2013
1584 posts
1898 upvotes
Red Deer, AB
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?
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Deal Fanatic
Apr 5, 2016
5050 posts
3581 upvotes
Calgary/Vancouver
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.
Current Fido and Rogers customer.
Ex Koodo customer.
Member
Oct 12, 2005
412 posts
344 upvotes
Lower Mainland BC
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.
Deal Expert
User avatar
Jul 5, 2004
25353 posts
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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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