Good Time to Remortgage a Home?

Published November 30, 2020 by Real Estate Leads

Clients don’t just see their realtor as the individual who’ll bring a buyer to them when they’re selling a home, or fast-track the process of getting them into the home they want. The professional relationship runs a lot deeper than that, and one thing that’s true most of the time is that these folks will be looking to you to be an expert on the entirety of the housing market and – to a lesser extent – being in the know about smart moves related to being a homeowner.

Even if they aren’t homeowners – yet.

Financing of a home can be a part of that. While most realtors will have a preferred partner that they can recommend to clients as a mortgage broker, there’s still a lot to be said for being knowledgeable about that side of the equation on your own.

Now it’s true that part of being seen as knowledgeable is being reputable, and in large part that comes from being well established as a realtor in the area. When you’re a new realtor nothing gets you to that point quicker than selling homes and bringing buyers to other realtors who are selling homes for their clients. To that end, our online real estate lead generation system here at Real Estate Leads is an excellent resource for realtors who’d like that leg up on the competition. It’s highly recommended.

But back to topic here, and again in relation to the financing of homes for clients. There has been some discussion lately about whether or not now is good time for homeowners to be remortgaging their homes. Is there any truth to that, and if so, why? Let’s have a look.

Unique Opportunity

It’s no secret that historically low interest rates recently have prompted homebuyers to pull the trigger on home purchases like never before, but it’s also presented a unique opportunity for real estate investors.

Let’s take Toronto for example. The COVID-19 pandemic has lessened demand in the condo rental market, much to the disappointment of many investors. The Bank of Canada’s interest rate cuts did create historic lows designed to resuscitate the economy, and what they also did was give investors an opportunity to refinance their mortgages.

In some cases the primary aim was to lower their monthly payments to something that was more in line with what they could afford and still maintain their base of investment funds. The situation now is that they can unlock up to 80% of the appraised value and potentially make it so that the payments are lower than their existing payments.

No Need to Wait for Renewal Time

The best time to refinance a mortgage has always been when it’s due for renewal. However, with mortgage rates as low as they are it becomes a situation where refinancing before term could be worth the outstanding penalty.

Why? Because of the significantly larger amount of equity that can be unlocked, which could then be repurposed into tax-deducible portfolio growth.

Add to this the fact that there are going to be buying opportunities as the market changes, ones where investor buyers can take advantage and take out money for tax deductible investments. For example, say your client takes out an extra $100,000 from a refinance. On account of their property value being higher than when they bought it, they are then paying $210 per month tax deductible on interest.

What this means is that whether it’s your primary residence or a cash flow positive income property where you don’t need the income, you can use that income to invest in more properties and reduce your income for tax purposes.

Further, you can inform your client that the unlocked equity can also be used to consolidate other debts. It is potentially a very shrewd play that can increase the client’s investment capacities down the road, and the solidity is there given how the real estate market has weathered the storm of the COVID-19 economic downturn.

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