This is when you typically change the terms of the original mortgage.
The most common method is borrowing more money and/ or increasing the amortization. You can either go with your existing lender, or go elsewhere to find a much better deal.
E.g. existing mortgage balance $100,000 with a 25yr term. You wish to borrow $50,000 for renovations. You would refinance your home for $150,000. At the same time, you can also increase the amortization to 30 years to bring your mortgage payments lower.
This is where your mortgage term is coming up. e.g. end of a 5 year fixed / variable mortgage and you have no plans to change anything i.e. not planning to borrow more money, increase the amortization or change the owners of the property, etc.
You have 2 options:
1. Renew with your existing lender (assuming your lender is willing to renew you). This is option is straight forward. You can simply select the option you want (e.g. new 5 year term or different term), but you are restricted to what your existing lender has offered you.
2. Have your mortgage broker shop around different lenders to see if you can find a better deal.
You can find much more competitive rate and more favorable terms with a new lender.
When refinancing with your existing lender or new lender, you have to go through the process of a new mortgage application and fulfill the following criteria:
Income to debt service ratios
Maximum borrowing against your property cannot be more than 80% with A and B lenders. Private lenders, can go up to 85-90%
Appraisal – usually required to confirm the value of the property, however some lenders are now introducing Automated valuation systems which may mean a full appraisal is no longer required, unless the system is unable to provide a value.
Credit – will be fully assessed to confirm no derogatory remarks/ issues with past credit. If there are issues, then B lenders or 2nd mortgage lenders are also able to help in this situation.
When renewing with a new lender, this is called a switch. This will also require a new mortgage application to the new lender.
Assessment of income, property, and credit will be required.
So long as everything fits with the new lender, then the benefits of a lower rate and better terms make proceeding with make sense.
Some lenders have now moved towards an automated valuation system to confirm the value of a property. If this is the case, then the lender will not require a full appraisal. However, if a value cannot be determined, then appraisal will be required.
Most lenders will use a company called FCT (First Canadian Title) to deal with the legal paperwork. You can also use them to act for you as well.
Otherwise, you can always use a lawyer. Although more expensive, they are generally more efficient.