4 Reasons why most home owners refinanced in 2020

Mortgage Tips Josip Popov 22 Sep

2020 has been a very unique year. Although, unique might not be the best word to describe this year, I chose that word because I try to see the positive in every circumstance.  The pandemic took the world by surprise and changed our daily routines for the foreseeable future. A lot of us got used to working from home, with children partying in the background, some of us lost their jobs and others found an opportunity to make a change. For most people, the uncertainty of future income and financial stability added extra anxiety in daily lives.

From a mortgage perspective a big positive that happened this year, specifically since the pandemic started is that interest rates dropped at an all time low. Here are the top 4 reasons why so many homeowners refinance their properties in the last few months.

Reduce your monthly Mortgage payment

This is a fairly obvious one. With the interest rates being so low now, if you hold a 600K mortgage at 3.2% interest rate, on a 25 year amortization, your monthly payments would be  $2901.4. On that some mortgage if you refinanced at 2.09% interest rate (which is now a pretty common refinance rate) your monthly payment will reduce to $2566.8. For homeowners that were in the middle of a term, this venture might carry a cost of breaking an existing mortgage which in most cases is far less the monthly savings over the next 5 years,

Pay off Debt

For  some Homeowners it became difficult to service their monthly debt payments. A lot of homeowners refinanced to pay off their credit cards, car payments and other loans. Paying off a car and credits cards with your mortgage over 25 years carries certain downsides but it significantly helps improve your immediate cash flow situation.

Invest after the stock market crash

Some homeowners that are a bit more savvy on the investment side, leveraged their equities in their homes in order to make some money in the stock market. If you take out $100,000  equity from your home at 2.2% interest rate and make an average of 8-10% on your investments than you are essentially in the positive every year. The markets have been very strong so far this year and a lot of homeowners who invested in the first week or two after the initial dip because of the pandemic are up 20%-30%.

Purchase another property

Some of us realized that we will be working from home for the unforeseeable future and the necessity of being in the city or being close to work is now gone. Especially during the time of quarantine, a bigger home, bigger lot and more space became a new form of luxury. The purchase of a second property carries a requirement of 20% downpayment as well as enough income to qualify you for another mortgage. Two things happened here:

  1. If a homeowner didn’t qualify for another mortgage because their monthly payments on the first mortgage were to high, they would refinance to get a lower interest rate and stretch out the amortization to 25 or 30 years in order to reduce their monthly payments.
  2. They would take out equity to have enough funds to put 20% on the new property they are purchasing,


Mortgage Tips Josip Popov 18 Aug


Whatever you might need some extra cash for right now, there are many lending options available. And while being able to shop around is a good thing, it can also be overwhelming.

One of the key things to look for in any loan is a favourable interest rate – usually expressed as a percentage of the principal amount. Generally speaking, payday loans and credit cards have the highest interest rates, while conventional mortgages have the lowest, with other options falling somewhere in the middle. Let’s look into the interest rates offered by three popular types of loans, as well as what else you should be considering when comparing your options.


Aside from a conventional mortgage, a Home Equity Line of Credit (HELOC) has one of the lowest interest rates of all lending options, typically between 3.5 and 5.5%. A HELOC is a revolving line of credit which allows you to release equity from your home by borrowing up to 65% of the property’s value.

HELOCs are a popular choice due to their low interest rate and the fact that they allow you to access your home’s equity while continuing to live there. They’re also a good choice if you want the flexibility to take out money when you need it, rather than receiving it as a lump sum or on a monthly basis.

Unfortunately, however, banks have recently become stricter about who they approve for a HELOC. To get one, you have to prove you have sufficient monthly income, a low credit score, and a favourable debt-to-income ratio – something which has led to many Canadians seeing their applications denied.


Another popular lending option is a personal loan. These are loans which aren’t secured against an asset such as your home.

Advantages of taking out a personal loan include their versatility – unlike a mortgage or a car loan, they can be used for whatever you want, like consolidating existing debt. What’s more, the application process is usually quicker than other lending options; in some cases you’ll get the money in your bank account within a few days. Another advantage is that the interest rate is also usually – though not always! – fixed.

On the flip side, however, their interest rates are often higher than other options such as a HELOC – around 8.5-12%. On top of this, they can be hard to qualify for and have rigid repayment terms, meaning monthly payments must be made.


Another lending option which is tailor-made for Canadians 55+ is the reverse mortgage. A reverse mortgage allows you to access up to 55% of your home’s equity without selling, and while interest rates are slightly higher than that of the HELOC – at 5-7% – they are significantly lower than other loans and offer many other benefits that make them a strong option.

These benefits include the fact that they’re easier to qualify for, as you don’t have to prove a monthly income. You also don’t have to pay back what you owe until you leave the house, taking away the stress of having to make monthly mortgage payments. Plus, the CHIP Reverse Mortgage’s No Negative Equity Guarantee means you’ll never end up owing more than the house is worth, leaving you free of financial stress to live the retirement you’ve always planned.

When looking for the best lending option, comparing interest rates is a great place to start, however they’re not the whole story. Taking an in-depth look into the pros and cons of each option will help you choose the one that’s right for you.

To discuss your options further, contact your DLC mortgage agent today.