Want to refinance into a record-low mortgage rate? Do these 4 things


Mortgage rates are lower than ever right now, which is great news for homebuyers.

But if you already own a home and have a mortgage, you can benefit from these record-low rates too — even if your current loan is only a year old.

Refinancing into one of today’s ultra-low rates could save you thousands of dollars a year in interest, and tens of thousands of dollars over the course of your loan.

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

1. Be certain refinancing is the right move

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

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

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.