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April 2012 - If you can no longer afford to pay your mortgage payments consider selling your house before a lender list it for you.

If you can no longer afford to pay your mortgage payments consider selling your house before a lender list it for you.

☳ by Adam Aspilla

Basically, to refinance your mortgage is to increase your existing mortgage to get cash against the equity of your house for consolidating your debts, start a business or for whatever purpose.

There are many homeowners regretted for hastily refinancing their existing mortgages without knowing the cost of refinancing in advance.

Costs of refinancing may amount to several thousand of dollars especially if the existing mortgage has a year or more before its term matures. Interest penalty is usually the amount of interest up to maturity.

These are the costs associated to mortgage refinancing:  appraisal fee, legal fees and disbursements, broker’s fee, lender’s fee or bonus, and mortgage penalty.

If your credit rating is not good or your income is not satisfactory or both you could not meet the standard credit requirements by a bank. You need a mortgage broker to look for secondary lenders. 

A mortgage broker charge you a broker’s fee for he/she does not get finder’s fee for her/his services from a lender on a borrower whose credit rating or income does not meet bank’s standard credit requirements. 

Broker’s fee also amount in the thousands of dollars depending on the difficulty of finding a lender who is willing to approve your mortgage application.

To avoid the cost of mortgage interest penalty, do not refinance if possible if your existing mortgage has a year or more before it matures.

If you really need to refinance, you may consider a second mortgage rather than paying off your existing first mortgage where you are required to pay substantial interest penalty.

Better still to avoid regrets and surprises, it is prudent to know in advance the cost of refinancing before making a decision to refinance. Otherwise, you may end up the cost of refinancing is more than the net amount you receive from it.

 

 

Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.