As the day of your mortgage renewal draws near, you may find yourself feeling overwhelmed by the uncertainty of how you’re going to manage increased payments amidst today’s interest rates. Rest assured, you’re not alone. Many Canadian homeowners are facing the same dilemma, unsure of where to turn for accurate guidance. To help you feel prepared and confident in exploring your options, we’ve compiled a comprehensive list of key considerations to keep in mind as your renewal approaches.
1. Start Early
Don’t wait until the last minute to address your mortgage renewal. Taking a proactive approach could potentially save you hundreds of dollars in interest per year (and sometimes even more in avoided penalties down the road). Many financial institutions only provide renewal rates within 90, 60, or even just 3 weeks before the maturity date, leaving you with limited options and less negotiating power. By exploring your options early, you can ensure that you’re making a decision aligned with your financial goals. Brokers can secure rates for your renewal as early as 120 days before maturity, giving you ample time to monitor the market while safeguarded against potential rate increases.
2. Consider the Future
During renewal discussions, it’s essential to consider your long-term needs and goals. Are you planning to stay in your current home indefinitely, or is there a possibility of relocating or selling? Assessing your household income and debt situation can help determine if refinancing or renovating using your mortgage is the right choice for you. Keep in mind that signing directly with your lender may limit your flexibility to pursue these options midterm without paying significant penalties.
3. Qualification Concerns
With today’s high interest rates, it’s natural to have concerns about qualifying for your mortgage. Fortunately, there are various tools and solutions available to address these worries. Many lenders have adjusted their qualifying rates for insured mortgage transfers (renewals), allowing borrowers to qualify at the contract rate (what you actually pay) rather than the stress test rate (the contract rate plus two percent). This provides more flexibility and options for borrowers, allowing you to shop around. And as long as your mortgage is in good standing, your current lender will offer a renewal agreement. The terms and rates may not be optimal, but you always have this offer to fall back on if nothing else works out.
Another new policy released in 2023 allows a common-law spouse to be added to the mortgage at renewal (subject to lender approval). This increases qualification options at renewal, which is the perfect time to make these changes without incurring additional fees.
4. Managing Higher Payments
Let’s be honest – who has an extra $500 a month lying around to add to their mortgage payment? If the prospect of higher payments (along with additional expenses due to the increased cost of living) sounds unmanageable, there are strategies we can help you employ to mitigate the impact.
Ways to Decrease Your Mortgage Payment
If you currently pay bi-weekly or make additional lump sum payments, your amortization has been accelerated. At renewal, lenders allow us to reset the amortization to its original schedule for the renewal term, thereby reducing the payment amount.
Refinancing is another way to change the amortization schedule to help reduce your monthly payment obligations. An added bonus is that refinancing also allows you to access the equity you’ve built in your home. This can be used to pay down other high-interest debt (such as credit cards and lines of credit) to free up cash flow.
5. Seek Professional Advice
While input from friends and family can be valuable, every mortgage situation is unique. It’s essential to consult with a professional who can provide personalized guidance tailored to your specific circumstances. Educating yourself on various lenders and mortgage scenarios will help you make an informed decision. Ensure you seek advice from a reputable source to gain a well-rounded understanding of your options.
Looking for a broker? Our team is dedicated to providing you with all the information you need to proceed confidently with the best mortgage solution for you, whether that means staying with your current lender or exploring alternatives. As a reminder – our services are completely free! We get paid by the lender for sending them your business. Don’t let the renewal process overwhelm you – speak with one of our team members today and take the stress out of renewing your mortgage.
