Refinancing Solutions Provided By Canadian Mortgage Brokers

Home owners face a perennial refinancing decision each time the term on their existing home mortgage expires. Do you renew your mortgage with your existing bank or lender, or should you shop around to see if better rates and terms are available from another lender?

Most banks and institutional lenders will offer their existing borrowers competitive interest rates when it comes time to renew a mortgage - particularly if the borrower does a little leg work and finds out the competitive rates from other lenders. Mortgage renewal is a no-brainer for a bank's loan officer, who is often able to shave a half-point of interest off posted rates or match the offers of competitors who are trying to entice an existing borrower to take his or her business down the street. Difficulties can arise, however, when there has been a material change in the borrower's circumstances.

The two instances in which borrowers are most apt to run into difficulties securing refinancing from their existing lender are when (a) their employment profile or income stream has changed, and (b) when the price of their home house prices has decreased in value. While the Canadian housing market has stabilized and house prices have maintained their value and continue to grow, albeit at a more moderate rate, there are some local markets where housing prices have dropped. Moreover, there has been a general tightening in Canadian lending practices as credit markets have tightened globally due to turmoil in the U.S. mortgage and housing markets. As a result, some Canadians who have less than optimal credit scores, who have been affected by job losses and/or who have seen the value of their homes drop are reportedly facing greater than normal difficulties in obtaining refinancing for their existing mortgages.

Borrowers from banks and other federally regulated lenders are required to purchase mortgage insurance for high-ratio mortgages where the value of the mortgage exceeds 80% of the value of the mortgaged property. As a result, some homeowners who have seen the market value of their property drop below the high-ratio mortgage threshold may be required to obtain mortgage insurance from the Canadian Home Mortgage Corporation, or one of the private federally recognized mortgage insurance companies. Obtaining mortgage insurance can prove difficult in such circumstances for individuals with a bad credit history and poor credit scores.

"People with a shaky credit rating, who relied on so-called 'B' lenders for a mortgage, could be left scrambling to find a new lender if their mortgage is coming due soon," according to Chatham, Ontario's Daily News. Homeowners in some Ontario cities affected by manufacturing job losses and falling housing prices have reportedly fallen into the gap created when they go to refinance with federally regulated lenders who now require mortgage insurance, but mortgage insurance is not commercially available based on their financial circumstances and/or past credit history.

Home owners experiencing difficulties in obtaining refinancing, as well as savvy consumers looking to find the best rates and terms available from competitive lenders are increasingly using the services of mortgage brokers when it comes time to refinance. People with poor credit finding themselves unable to renew their mortgage is "happening quite frequently now," reports a local Chatham, Ontario mortgage broker, noting that the "market is very, very shallow right now" for people looking to refinance with poor credit.

Rather than relying on loan specialists at their local bank to obtain refinancing, home owners - particularly individuals with marginal credit scores and credit difficulties - are turning to mortgage brokers who offer a much, much wider of mortgage products from a broader spectrum of publicly regulated and private lenders. Most often Canadian mortgage brokers are able to find a refinancing solution that banks cannot offer, and are often able to offer homeowners better terms and rates for refinancing than are available from the bank that holds their current mortgage.