this post was submitted on 14 Aug 2023
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Hello!
I have a silly question, I’m confused as to how mortgage refinancing works. Let’s say I have a 25 year mortgage at 1.8% close to maturing, at the end of my term I have let’s say $450,000 left to pay down. I need to refinance for 20 years ears, but the rates are higher, 7%. This means that my mortgage is now $3800 per month or $1300 more than it was before. Does that seem right? How can anyone afford this kind of increase? Houses for rent in my area are going for $2100-2500 per month, and I’m considering selling if this is right.
I didn't check your math, but yeah, sadly, that's exactly how it works in Canada. This isn't called refinancing, but renewing.
You could refinance if you wanted to extract additional equity from your home, for example if you had $450k left to pay, but wanted to borrow an additional $30k for home renovations ; or if you wanted to extend your amortization back to 25 years or even 30 years, which would allow you to decrease your monthly payments.
While selling and renting is an option, I would also consider refinancing to extend amortization, but you should get in touch with your bank or mortgage broker in order to see what is possible in your situation.
Not to show lack of empathy, does it work any differently in other countries?
I've read someone in the US can lock in for the 25 years.
Yeah they've got 30 year mortgages, or at least had
Heh sorry I lost context, I just meant that after the period the rates get adjusted