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Do You Need a Real Estate Lawyer To Refinance Your Mortgage?

Canadian housing and mortgage experts are looking at an average annual percentage rate (APR) of 5% to 6% by the end of 2023. The scenario has not been ideal for homeowners since 2022, when mortgage refinance interest rates began soaring.

Despite changing market conditions, people will always have their reasons for refinancing their homes. What remains constant is the need to be cautious when applying. 

Diving into mortgage refinancing without sufficient knowledge can drastically affect one’s finances. To increase homeowners’ knowledge and improve their judgment in making decisions, real estate lawyers can help.  

Key Takeaways
  • A real estate lawyer can help borrowers get the best out of mortgage financing and avoid potential complications. 
  • Mortgage refinancing offers several benefits to borrowers, such as lower interest rates and monthly payments.
  • Applying for mortgage refinancing can be complicated and risky for borrowers who are not well-informed about the process. 

An Overview of Mortgage Refinancing 

If you’re planning to see a lawyer about refinancing your mortgage, it’s best to understand the process beforehand. Mortgage refinancing is exchanging your current mortgage for another one. As it is equivalent to getting a new loan, your principal borrowed amount and interest rate – and, therefore, your monthly payment – will also change. 

While mortgage refinancing is more straightforward than getting a new mortgage for homebuyers, the process is highly similar. You’ll need to produce pay slips and tax returns and pass the mortgage stress test to prove your ability to pay. It also defines the rules a lender uses in deciding whether you qualify for a mortgage and the maximum value you can borrow. 

Refinancing typically takes from 30 to 45 days. Inspections, appraisals, and other related third-party services are the usual culprits for any delays in the process. The size of the property and the homeowner’s current state of finances will also play a part.  

Reasons for refinancing a mortgage

When a homeowner decides to refinance their mortgage, the reason is often tied to a benefit. Hence, the more reasons they have, the more they get from refinancing. Given they have carefully assessed your financial position, they can enjoy several advantages from a refinanced home, including the following:  

Lower mortgage rates. This is the most common reason people consider home refinancing. Mortgage rates are never permanent. Refinancing can mean significant long-term savings for the homeowner when the numbers decrease. When their credit situation improves, homeowners can also be eligible for lower mortgage rates, making refinancing a wise move.  

Lower monthly payments. Another common reason for refinancing a home is lower monthly payments. When interest rates drop, total monthly payments follow suit, especially with the same repayment period for the old and new mortgage. In other cases, a homeowner may reduce their monthly payments by refinancing to extend the repayment period.  

More predictability. Homeowners with adjustable-rate mortgages (ARM) can shift to fixed-rate mortgages (FRM) to have more control over their costs. This conversion will keep their interest rates locked in for the remainder of their loan instead of being dependent on market conditions. Additionally, it helps them manage their financial plans with more certainty. 

Cash-out refinancing. Refinancing can be an option for homeowners who want to borrow cash against their home equity. Under this arrangement, known as a cash-out refinance, the borrowed money will count into the mortgage principal owed. Mortgage rates are generally cheaper than other debts, such as credit cards and other unsecured debts. They are even tax-deductible, making cash-out refinancing a brilliant way to borrow. 

Mortgagor control. Circumstances can change for some people, prompting them to remove certain mortgagors from a property. After divorce, a couple may decide to remove one spouse’s name from the mortgage. A son or daughter may no longer need the support of a parent, or that parent may want to withdraw the support for some reason. The only way to extract someone from a mortgage is to refinance it.  

How to refinance a mortgage in Canada

As in other countries, the steps to refinancing a mortgage in Canada come with particular nuances. However, the general flow is the same. 

It begins with deciding whether to refinance with the same lender or another. Either way, calculating the refinancing cost comes next, followed by filling out and submitting the forms. At this point, the homeowner can wait for the lender’s feedback. 

While the actual steps may seem straightforward, the preparation and impending decisions can be challenging. Despite owning homes, people considering refinancing don’t always know the nitty-gritty of the mortgage process. 

Sometimes, this lack of knowledge can lead to a full-blown personal financial crisis, otherwise preventable with the help of a real estate lawyer.  

Do you need a real estate lawyer to refinance your mortgage?

Mortgage refinancing is not only a legal transaction but a complicated one. It involves a lot of paperwork, terms, and many confusing possibilities for the uninformed homeowner. While a lower mortgage rate offer may seem favourable, the property’s current value can easily offset any benefits. When market conditions change, the situation can get even trickier.  

A real estate lawyer can help homeowners make informed decisions and avoid adverse effects on their future finances. If you need more clarification about hiring legal services to refinance your mortgage, below are reasons to consider it seriously.

Clarify refinancing goals

Mortgage refinancing offers you several options as a homeowner. Suppose you’re looking to reduce your monthly payments. You can extend your repayment period or go for lower variable or fixed interest rates. When the interest rate drops, you can lock in your mortgage at that rate for a fixed term. 

This is only one scenario a lawyer can simplify for you so you can make better decisions. With their expertise in real estate law, they can explain your options based on your refinancing goals.  

Manage paperwork

Applying for mortgage refinancing involves a lot of documentation. While you’ve gone through a similar process when applying for a mortgage, some aspects can be unique to refinancing. This is another way a lawyer can help you. They assist you in filling out the forms, ensuring you enter all the necessary information. 

The lawyer can also assist you with the necessary paperwork to support your application. You can always do online research, but there’s no substitute for an expert’s legal advice.  

Detect scams

In Canada, the total value of mortgage debt outstanding was almost 1.75 trillion Canadian dollars in 2022. The market is thriving as always, but it also attracts predatory lenders. Refinancing lawyers can shield you from unscrupulous mortgage providers with their experience detecting scams. 

The signs are usually in the contract, such as misleading information, or pitfalls in the fine print, such as hidden fees. Real estate lawyers can spot these for you and prevent you from falling victim to them.  

Explain the fees  

The mortgage refinancing process comes with many fees payable to the lender and other parties involved in the loan. A lawyer can orient you about these costs, so you understand where your money is going. Here are the most common fees charged as part of a mortgage refinance application: 

Application fees. These are loan processing fees, including the costs of performing credit checks. 

Origination fee. This one-time fee covers the costs of preparing your loan. 

Appraisal fees. These are fees paid for the appraisal of a mortgaged home’s value. 

Inspection fees. Before you get approval for a new mortgage on your loan, the lender might require an inspection of its current condition.  

Closing costs. These are fees paid to the lender’s lawyer who closes the loan. 

Refinancing fees may represent from 3% to 6% of the remaining principal on the mortgage. Some lenders will not require you to pay these fees upfront, but you’ll still effectively be paying them through higher interest rates. In any case, a lawyer can ensure you’re only paying what you should. 

Identify potential issues  

You may have a general idea about mortgage refinancing as a homeowner. However, there may be issues that a real estate lawyer can identify for you. 

For example, suppose you’re considering refinancing because of an impending foreclosure. In that case, a real estate lawyer will explain what you need to do to qualify for a refinance. Typically, you cannot refinance a home in foreclosure. You need to be current in your payments. If that isn’t possible, the lawyer may suggest other options, such as renegotiating the mortgage or asking for a payment deferral. 

If you’re planning to refinance your home with bad credit, a lawyer can tell you how to raise your chances of being approved. There are even lawyers who specialize in real estate transactions for homeowners with bad credit. Before hiring one, ask the right questions, so you end up with the right legal specialist. 

Protect the borrower’s overall interest  

A real estate lawyer will ensure you achieve all your mortgage refinancing goals in the safest, most efficient way. You will encounter other professionals who may be trustworthy in their respective roles.

However, a lawyer on your side will be working for your best interests, including protecting you against abusive lending practices. You will pay legal fees, but the protection you receive will be worth it.

Did you know?

Most mortgage loans in Canada are renegotiable every five years for a 25-year term. However, others can be renegotiable after the sixth month or the 10th year. Note that each renegotiation comes with a higher interest rate risk than the original mortgage.

Choose an Experienced Real Estate Lawyer  

Mortgage refinancing is a complex legal undertaking for which you want at least some basic knowledge. Beyond that, you need someone who can guide you and help you achieve your desired results. This is one job a real estate lawyer does best.

While homeowners are not required to hire a lawyer when seeking mortgage refinancing, consulting one offers many tangible benefits. Depending on your specific situation, you may discover more benefits as you go through the process.

It would help if you remembered that not all lawyers are of the same calibre. In Toronto, Diamond Law is known for its roster of experienced real estate lawyers who can help you with mortgage refinancing.  

You can get the best out of mortgage refinancing when an experienced real estate lawyer guides you and makes recommendations. Contact us today to get started on the process.

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