Approximately half of all mortgages in Canada are set to renew in 2025 or 2026, due in part to the pandemic when there were record low interest rates.
Most of those mortgage holders will face higher interest rates, with increased mortgage payments. It’s smart to have a plan for managing your mortgage going forward.
When your current mortgage is getting close to its maturity date, you will need re-negotiate your mortgage. That is the opportunity to decide on the new term length, negotiate the new mortgage interest rate and even move your mortgage to a new lender.
Most lenders are required to provide you with a new mortgage offer at least three weeks before your maturity date if they are interested in renewing your mortgage. They are not obligated to offer you a renewal should there be a change in your circumstances or a late payment history.
Statistics show more than 50% of homeowners renew their mortgage with the current lender without negotiating the terms. That doesn’t give the lenders much incentive to offer the best rates at renewal time. They are betting on the fact you won’t shop around or won’t want to go through the hassle of applying for a mortgage with a new lender.
Signing the mortgage renewal offer without exploring other options is not in your best interest. Yes, it’s easier to remain with your current lender as you don’t have to go through the hassle of providing new documents etc. but you could find better rates and terms with another lender perhaps saving you thousands of dollars in interest costs.
Here are a few questions to ask yourself before you sign that mortgage renewal offer.
• Do you need Access to Equity for other things? New business, new property, University.....
• Could Fluctuating rates be problematic? Tailor your mortgage renewal around your needs.
• Thinking of selling in the future? If so you need to consider penalty and the ability to port/move to a new property.
• Do you have renovations in the future? Looking at your financing options, such as a home equity line of credit or keeping your monthly mortgage payments low may be options
• When do you want to be “mortgage-free”? If you’re planning on an early retirement, it may make sense to pay down your mortgage or re-structure your current mortgage so you have access to your home equity once you retire. Mortgage financing after retirement can be less favorable.
• Could you use your home equity to fulfill other goals? Refinancing a mortgage can be one way to free up cash you need for other things, which could even include buying another property. Mortgage renewal time is an ideal occasion to review all your options.
• What are your best rates and terms? Your good credit history can help in this. A mortgage broker analyzes mortgage markets daily to make sure you have the best fit for your needs.
By working with a mortgage broker, you gain access to a wide range of mortgage options from various lenders. If you would like to discuss your upcoming mortgage renewal and explore the possible options available to you, I can help you