Once you find the perfect home and your loan has been approved, there are a few more steps to take before you receive the keys to your new home. One of those steps is paying closing costs.
What you need to know about closing costs
At closing, you’ll need to review and sign the loan and other documents to finalize the home buying process, as well as pay some upfront costs.
- Depending on the lender, the type of mortgage loan, and the home’s location, closing costs can run into thousands of dollars (typically 2-5% of your home’s purchase price).
- Closing costs can be paid by you, the home seller, or the lender.
- You may be able to use monetary gifts from family members to pay for all or part of your closing costs.
How does it work, refinancing your home?
First, whether we use the expression “remortgage your house” or “refinance your house”, know that both mean the same thing.
Mortgage refinancing gives you the option of using the equity or equity in your property to borrow money. Equity or equity is the difference between the current value of your property and the balance that remains to be paid on your mortgage.
When can I do a mortgage refinance?
You can refinance your property at any time, provided you qualify for refinancing, of course. You don’t have to wait for your term to end and your mortgage to renew.
To make renovations in your home
Do you need one-time financing, for repairs to the roof of your home, for example? Refinancing can allow you to access the amounts required for this work, while allowing you to take advantage of the low interest rates offered. “Refinancing your mortgage could allow you to obtain liquidity,” adds Mohamed Wakkak, senior advisor and financial planner at the National Bank. If you are on the cusp of retirement, it is sometimes more interesting to do so, rather than withdrawing assets from other investments that generate returns, especially when the house is debt-free. »
There are also other options. Do you know the home equity line of credit ? This is an ideal product to finance the purchase of your property. Depending on the equity in your property, a line gives you more flexibility by giving you access to these funds at any time. You can withdraw money when you need it. You will also decide the amount and frequency of repayments. The home equity line of credit also gives you the choice of integrating your day-to-day transactions and your financing under a single account or integrating all your existing National Bank accounts.
For the purchase of a secondary residence
It is possible to refinance your mortgage for the purchase of a second property . Discuss the question with your adviser to be well prepared. How much can you get? How much will your monthly mortgage payments be? Will you be able to afford the fees associated with your two properties?
To pay off your debts
If you have accumulated debts with high interest rates, you could consolidate them with a mortgage refinance.
You could then save interest or lengthen your repayment period and therefore reduce your monthly payments. Your advisor can advise you on repaying your debts and help you achieve better financial health.
To invest
You could also refinance your mortgage to invest. This strategy can be beneficial for financing an investment opportunity, such as investments or the purchase of rental property. The latter is a fairly complex financial lever. “We must first assess how much the refinancing would bring in, advises Mohamed Wakkak. We can better see the impact of each action when it is quantified. To fully understand the benefits, speak with your advisor or financial planner.
To invest in your RRSPs
If you are on the eve of retirement, and over the years you have accumulated RRSP rights, this may be an attractive option. You could, with a mortgage refinancing, free up funds to contribute to it, with a view to a more comfortable retirement.
“You will thus obtain a tax deduction on your current income and you will benefit from a tax-sheltered investment”, explains Mohamed Wakkak. This strategy is suggested especially for those approaching retirement. But it always depends on your overall financial situation. This option should be assessed with the help of a specialist advisor.
To finance your retirement
“The house is an asset, but an asset that is not liquid,” emphasizes Mohamed Wakkak. You should therefore not rely on the latter as a pure source of income to finance your retirement.
However, if you have recurring financing needs, there are other options to maximize your retirement income instead of refinancing your home. That’s why it’s so important to have a retirement plan and meet with an advisor to explore all the possibilities.
To start your business
“For new entrepreneurs, it’s a choice we often see,” admits Martin Cinq-Mars, senior advisor in corporate sales effectiveness at the National Bank. It is often difficult for new entrepreneurs to seek financing.
Again, don’t forget that refinancing your home is a debt that you will have to repay. Talk to an advisor about your options for starting a business.
In closing, depending on your situation, using mortgage refinancing may be a good idea. Before leaping, it is to your advantage to meet with your advisor, who can help you choose the best strategy that will allow you to invest in your projects and, above all, to make them a reality.
