Refinancing: Important things to know
Last updated: 5 Sept 2025
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Anyone who has taken out a home or condo loan has likely heard the term "refinancing." Refinancing simply means borrowing new money to pay off existing debt, eliminating the higher interest rates associated with a home or condo loan over a longer period of time. However, we shouldn't just consider the lower interest rate on the new loan; we must also consider other equally important factors, including:
Refinancing Costs
Refinancing involves a number of expenses, including a prepayment penalty of approximately 2-3% of the full loan amount, a new loan management fee, mortgage registration fees, new appraisal fees, fire insurance, and stamp duty. We must carefully calculate these expenses to determine whether the reduced interest rate, combined with these costs, will result in a lower refinancing cost and make the refinancing worthwhile. These expenses are also immediate expenses, and the total sum is not small if we don't plan for them in advance. This can lead to the need to draw down a large sum of money, potentially leading to financial problems down the road.
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Longer repayment period
The number one disadvantage of refinancing is that it extends the repayment burden. When we borrow new debt to pay off existing debt, even though the installments and interest rates may be lower, the repayment period will be extended. If you don't have a long-term repayment goal and don't want to be in debt for so long that if you die, this debt will become a burden for your children, then refinancing may not be the answer. Instead, finding a lump sum to quickly pay off your debt is a better solution.
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Financial stability
Not everyone can easily refinance their home. However, to refinance or apply for a new loan to pay off the existing one, your financial status must be stable enough for the bank to approve the loan. For example, if you're unemployed, have just started a new job, or don't have enough salary or income to qualify for a new loan, refinancing won't be successful. Therefore, applying for refinancing is crucial. It takes time and a lot of paperwork. Therefore, if you decide to refinance, you must be confident that your finances will be okay at that time.
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Refinancing is a process that allows you to bear lower monthly payments and lower your loan interest rate. This is certainly a positive outcome, but to ensure that refinancing is truly beneficial, you must carefully consider all factors. You must compare and find lower interest rates to truly save money. Don't forget to factor in the refinancing costs. Otherwise, refinancing will not be worth the investment and time required to complete the process.
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Source: REIC
Refinancing Costs
Refinancing involves a number of expenses, including a prepayment penalty of approximately 2-3% of the full loan amount, a new loan management fee, mortgage registration fees, new appraisal fees, fire insurance, and stamp duty. We must carefully calculate these expenses to determine whether the reduced interest rate, combined with these costs, will result in a lower refinancing cost and make the refinancing worthwhile. These expenses are also immediate expenses, and the total sum is not small if we don't plan for them in advance. This can lead to the need to draw down a large sum of money, potentially leading to financial problems down the road.
___________________________________________
Longer repayment period
The number one disadvantage of refinancing is that it extends the repayment burden. When we borrow new debt to pay off existing debt, even though the installments and interest rates may be lower, the repayment period will be extended. If you don't have a long-term repayment goal and don't want to be in debt for so long that if you die, this debt will become a burden for your children, then refinancing may not be the answer. Instead, finding a lump sum to quickly pay off your debt is a better solution.
___________________________________________
Financial stability
Not everyone can easily refinance their home. However, to refinance or apply for a new loan to pay off the existing one, your financial status must be stable enough for the bank to approve the loan. For example, if you're unemployed, have just started a new job, or don't have enough salary or income to qualify for a new loan, refinancing won't be successful. Therefore, applying for refinancing is crucial. It takes time and a lot of paperwork. Therefore, if you decide to refinance, you must be confident that your finances will be okay at that time.
___________________________________________
Refinancing is a process that allows you to bear lower monthly payments and lower your loan interest rate. This is certainly a positive outcome, but to ensure that refinancing is truly beneficial, you must carefully consider all factors. You must compare and find lower interest rates to truly save money. Don't forget to factor in the refinancing costs. Otherwise, refinancing will not be worth the investment and time required to complete the process.
___________________________________________
Source: REIC
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