“Refinancing” of a current house is a process whereby the ownership of the land does not change, but a new, or a second, mortgage is registered on the title to the land.
Refinances are usually done for one of several reasons. First, a home owner may wish to take advantage of lower mortgage interest rates and substitute a new mortgage for the existing one on title. Second, an owner may wish to obtain a new first mortgage loan over their land, which also includes a debt-consolidation component; that is, to pay other debts which are at a higher interest rate than a new first mortgage loan would be. Third, a home owner may place a first mortgage on the title as a method of gaining access to equity in their home to finance other purchases, such as other real estate. Finally, an owner may register a “true” second mortgage on the title to accomplish any of the first three goals.
With few exceptions, the process for refinancing an existing property is nearly identical to the registration of a first mortgage when the property was originally purchased. Mortgage instructions are provided by the lender (a bank, or a private lender) to the home owner’s lawyers, who prepare the mortgage for execution. In a debt-consolidation scenario, the bank will also provide instructions that certain debts (existing mortgages, credit cards, vehicle loans, etc.) are either paid to a certain level, or that the accounts are to be paid in full and closed.
Once the new mortgage has been executed and submitted to the Land Titles Office for registration, the lender will advance the required funds to the home owner’s lawyers for distribution in accordance with the lenders instructions.
Owners who are considering refinancing their property should be aware that penalties to discharge existing mortgages can be significant. The owner should discuss this pay-out penalty with their lender thoroughly, to be sure they are fully aware of the short-term consequences of discharging their current mortgage.
CAMERON HORNE LAW OFFICE specializes in real estate transactions, and we are committed to providing quality legal services at competitive rates. Please contact our office for a fee quotation for the refinancing of real property.