There are many reasons why you might consider refinancing your mortgage. You might be looking for a shorter term, access to extra cash or a chance to take advantage of lower rates.

Benefits of Refinancing

More Equity, Faster

Many people refinance to shorten the term of a mortgage. Often, first-time buyers are appropriately cautious and take the maximum amortization on their mortgage to ensure they can meet the monthly payments. By refinancing to a shorter term at a higher monthly payment, you can end up saving tens of thousands of dollars in interest over the years. Furthermore, you build up equity in your home much more quickly and, should you need it, you'll have all that additional equity to borrow against.

Refinancing for Capital

Another good reason to refinance is to gain access to some additional cash. This is an especially good option if you have outstanding debts at an interest rate that is higher than your new mortgage rate. By using the additional cash to pay off your other debts, you are effectively amalgamating your debt under one roof at one low rate.  If you structure your new mortgage with the mortgage payment being the equivalent of what all consolidated debt payments previouslly totalled you could save thousands in interest costs.

Reducing Monthly Payments

Perhaps the best reason to refinance is to take advantage of lower rates that will reduce your monthly payments. After figuring all of the refinancing fees and penalties into the cost of your new mortgage, you might well be able to reduce your monthly payment by a couple of hundred dollars. That extra cash can go a long way toward other major purchases, or can add significantly to your RRSPs or other investments.