Standard Refinance

1. What is Refinancing?

Refinancing involves replacing an existing mortgage with a new one or getting another mortgage on the property, often to secure a lower interest rate, access home equity, change mortgage terms or to pay off debts.

2. Pre-Refinance Preparation

Assessing Your Financial Situation

• Credit Score: It is essential to check your credit score before starting the refinancing process as it will impact your refinancing options.
• Debt-to-Income Ratio: Calculate, with your mortgage agent, your debt-to-income ratio to ensure you meet lender requirements for financing.

Determining Refinancing Goals

• Lower Interest Rate: Determine if current interest rates are lower than your existing rate.
• Access Equity: Decide if you want to access home equity for renovations, debt consolidation, or other purposes.

Researching Lenders

• Comparison Shopping: Research and compare mortgage rates and terms from various lenders.
• Pre-Approval: Obtain pre-approval from a lender to understand your refinancing options and potential interest rates.

3. Application Process

Gathering Documentation

• Income Verification: Collect recent pay stubs, tax returns, and employment verification.
• Assets and Debts: Gather bank statements and information on any outstanding debts.
• Property Information: Have your property tax statements and current mortgage details ready.

Submitting the Application

• Lender Application: Complete the refinancing application with your chosen lender.
• Documentation Submission: Submit all required documentation to the lender for review.

4. Appraisal and Underwriting

Property Appraisal

• Lender-Ordered Appraisal: The lender will often order an appraisal to determine the current market value of your property.
• Access for Appraisal: Provide access to the appraiser and ensure the property is in good condition.

Underwriting Process

• Lender Review: The lender’s underwriter will review your application, credit history, income, debts, and the appraisal report.
• Conditions: The underwriter may request additional information or documentation.

5. Approval and Closing Preparation

Loan Approval

• Approval Notification: If approved, the lender will provide a commitment letter outlining the terms and conditions of the new mortgage.
• Rate Lock: Lock in the interest rate to protect against rate changes before closing.

Reviewing the Commitment Letter

• Terms and Conditions: Review the loan terms, including interest rate, loan amount, repayment period, and any conditions.

6. Closing the Refinance

Closing Document Preparation

• Retain a Real Estate Lawyer: You will need a real estate lawyer to assist you with mortgage transaction.
• Inform Lender of Your Lawyer’s Details: Your lender will send mortgage instructions to your respective lawyer, for which you will need to provide the lawyer’s details to the lender.
• Closing Disclosure: The lender will provide a Closing Disclosure detailing all loan terms, fees, and closing costs along with necessary documentation to be sent to your lawyer.
• Legal Documentation: Your lawyer will review the mortgage instructions and may request any documentation and information needed from your end as per the mortgage instructions. The lawyer will also prepare the necessary legal documents for your signature and review.
• Title Insurance: As per your lender’s instructions, your lawyer will purchase a title insurance policy on your property. Purchasing a title Insurance policy is a one-time cost unless you acquire a new mortgage, at what time you will need to purchase title insurance policy for that specific mortgage even if the lender is the same.

Closing Meeting

• Signing Documents: Attend the closing meeting to sign all required documents, including the new mortgage agreement and any disbursement authorizations and closing documents.
• Disbursement of Funds: After your lawyer submits the signed documents to the lender along with any required documentation and information and the lender conditions are fulfilled (from both lawyer’s side and your mortgage broker’s side), the lender will then send the closing funds in the lawyer’s trust account on the closing. New mortgage funds will be disbursed to pay off the existing mortgage by your lawyer (if you have an existing mortgage to be paid off), with any remaining funds (if cash-out refinance) provided to you. If there is deficit/cash shortfall before/after paying off the debt, you will need to cover the cash shortfall with your personal funds as guided by your lawyer.

7. Closing

Updating Records

• Title Registration: After mortgage requirements are fulfilled and mortgage funds have been received by your lawyer, the lawyer will register the new mortgage with the local land registry office – electronically via Teraview.

Refinancing a property in Ontario involves several steps, from assessing your financial situation and submitting an application to closing the new mortgage and updating records. Engaging professionals such as mortgage brokers and real estate lawyers is crucial to ensure a smooth and legally compliant transaction.

For more detailed information and resources, visit the Ontario Ministry of Government and Consumer Services website or consult with our lawyers today.