What to Consider When Renewing Your Mortgage

Family meeting real-estate agent to buy new home

So you receive a renewal notice from your mortgage lender, and while taking a look at what rate your lender is offering, you wonder where the last 5 years have gone. Many clients financial situations have changed during that time and now is the time to sit down and consider what options you may have. So before you choose your next term, lets take a look at what you should consider:

 

Are you risk-adverse or risk-loving?

While some  homeowners may lose sleep over increasing interest rates, and others just don’t care, will determine how suitable a Variable Rate Mortgage (VRM), is for you. If you get nervous about any hikes in interest rates, and wonder if you can afford a payment increase then you should probably be considering a Fixed Rate Mortgage (FRM).

 

Are you comfortable with the payment being offered?

Are you making extra payments on your mortgage or are you just getting by? The offer letter usually will tell you what your new payment will be based on the term and rate you choose. If you’ve been feeling financially strapped then now is the time to consider a refinance to increase your amortization and reduce your monthly mortgage payment.

 

Do you need cash?

Are your kids going to University in the next year, or two? Do you want to get rid of those high interest pesky credit card balances? Or are you looking at jump starting your retirement investment fund? Again now is the time to consider what cash you may have available and what you might need in the near future. A refinance may be the answer.

 

Downsizing or Up-sizing?

Is your family expanding? Or perhaps you want a bigger yard. If you are looking at selling in the near future, you should consider a shorter-term mortgage or at least a mortgage with a “Portable” option, and one that has flexibility. Sometimes referred to as an”Unrestricted” mortgage.

 

Are you really being offered the best mortgage rates?

The mortgage lending landscape in Canada is very competitive. If you know you have good credit, and good income, then you deserve the best rates a lender is able to provide. However, it very likely that your lender is offering a rate that may look competitive based on the lenders posted rates. But how does that rate stack up with other lenders. On average clients who used a mortgage broker for their renewal, received a lower rate that resulted in considerable interest savings. Bottom line do not sign the first offer the lender gives you, and it is always worth it to get a second opinion, it could save you thousands.

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