Here are four tips to make sure you get the best rate possible on a refi.

1. Be certain refinancing is the right move

businessman working on desk office with using a calculator to calculate the numbers, finance accounting concept lovelyday12 / Shutterstock

The whole point of refinancing is to save money, so you need to make sure you’ll actually come out ahead after covering the cost of the transaction.

Some of the typical refi costs include legal fees ($700 to $1,000), your mortgage registration fee (around $70), and a discharge fee (up to $400) if you happen to change lenders.

You’ll also get hit with a prepayment penalty for breaking your existing mortgage early, which can cost as much as 4% of your total loan.

That may sound like a lot, but with rates at all-time lows you’ll likely still save thousands, even with the hefty fees. Just do a bit of homework first to confirm that a refi is the right call in the long run.

2. Read the fine print

hands holding magnifying glass reading terms and conditions of loan agreement

gemphoto / Shutterstock

Before you fixate on some crazy-low rate you’ve seen in the news, take some time to look beyond the headline. Not everyone can get a rate like that — and you might not want to.

Some advertised rates only apply to high-ratio borrowers who are paying extra for mortgage default insurance. Some might require a commitment to a term length that doesn’t work for you.

Plus, no-frills mortgages can come with restrictions. Your new agreement might lack prepayment privileges, portability or be prohibitively expensive to break early.

So don’t assume your new mortgage will work just like your old one. Pay attention to the details while you’re hunting for a low rate and think about what features matter to you.

If combing through fine print stresses you out, there are free services like Loans Canada that will compare rates from Canada’s top lenders and find you the best loan available based on your unique needs.

3. Get ready to act fast

woman getting ready to sprint

Leszek Glasner / Shutterstock

The COVID-era economy is unstable; as a result, today’s amazing offers may not last for long. The quicker you get all your information in order, the quicker you can lock in your rate.

Here’s a document to-do list, so you’ll be prepared when your lender asks:

  • Check on your credit score — a high score will help you qualify for the best rates.

  • Keep the most recent mortgage statement from your current lender handy.

  • Gather pay stubs, bank statements and a letter of employment to prove you’re on the payroll.

  • Round-up tax returns and notices of assessment from the last two years as proof of income.

  • Provide proof that your property tax payments are up to date.

4. Prepare to break up with your lender

Woman saying no to lenders

SmitBruins / Twenty20

Loyalty is all fine and good, but the statistics say it’s better not to be married to your lender.

Companies know you don’t want to go through the trouble of shopping around — and they’re taking advantage. A Canadian government agency, the Office of the Superintendent of Financial Institutions, found that lenders offer their returning clients rates that are 0.09% higher on average than rates available elsewhere.

Even that difference — applied to a $400,000 mortgage with a 20-year amortization at 2.25% versus 2.34% — would save you $1,651 in interest over five years. But that’s just the average.

As with anything it pays to shop around. To save time, you can use Loans Canada to find the best rate for your specific financial situation.

Even if you’re just curious about how much you could save, the tool below will find you a free quote:

About the Author

Juliette Baxter

Juliette Baxter

MoneyWise Contributor

Juliette Baxter is a writer and editor who has covered everything from designer runway trends to RESPs for publications such as Chatelaine, Flare and The Globe and Mail. She also strategizes words and ideas for leading brands including Birks, RE/MAX and Shoppers Drug Mart.

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