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Hi Everyone, this is Lawrence Kong from the Mortgage Centre Citywide in Vancouver. A fellow broker told me an interesting story recently that made me reassess whether or not some of the information I was including in my blog was too complicated. A client of his wanted to refinance his current home's mortgage  to purchase a rental property. He was approved for a 400K mortgage so he assumed he was able to buy the rental property since the rental property price was 250K. The client didn't realize, that the 400K approved mortgage included the 300K mortgage that was still outstanding. In actuality, he was only approved 100K in new money. As a result the client was short 150K to buy the rental property.

A REFINANCE IS WHEN SOMEONE TAKES OUT A NEW LOAN ON THEIR CURRENT LOAN. When you borrow up to 80% of the value of the home, you do not need to pay a mortgage insurance. Anything over 80% then a mortgage insurance is included in your mortgage. The new money you receive is the difference between the new approved mortgage amount and the current outstanding mortgage. At the end of the refinancing process, the new money will be deposited into your account for you to use in whatever fashion you choose. The fees needed in a refinance are typically the legal fee and appraisal fee. You can include the legal and appraisal fee into your new mortgage amount that way you do not need to pay from your own pocket.