Mortgage Renewal? Stressed? Talk to Someone!

Your mortgage renewal is a crucial time. It is one of the few opportunities you will have to review your options with no penalty fee. So it is important that you take full advantage of it.

Nearly all professionals in the finance and real estate domain (including realtors, lawyers, accountants and financial planners) will recommend you talk to a professional mortgage agent to help navigate the process, understand the products and keep your finances in order. This is especially true today with a fairly instable and complicated marketplace.

Here are six important things to consider at renewal time:

1) Fixed or Variable?

Right now mortgage brokers are receiving a lot of inquiries from mortgage holders who are dealing with unexpectedly high variable rates. A popular option is to move this to a fixed rate, provided they can find a rate that is significantly lower, say a full per cent lower. Many are also opting for a three-year term so they are not locked into high rates for a full standard five-year term while they wait for rates to eventually come back down.

2) Changing Lenders

Refinancing or switching lenders to get a better rate is an option, but comes with its own considerations. The elephant in the room is the approval process. If your personal situation has changed adversely in terms of your overall income then this could pose some problems. Approvals are also more difficult these days with much higher interest rates and the government-imposed stress test. Simply renewing with your current lender, in most cases, doesn't involve an approval process.

3) Penalty fees

If you may be challenged to sell during your mortgage term or plan to stay in your home long term, this can have an big bearing on the best mortgage product for you. Variable rate mortgages have less penalty fees than fixed if you sell your home or need to refinance. Unless your mortgage is portable and you will be buying another home after you sell, variable is perhaps the way to go.

4) Refinancing

If you may be refinancing and changing your actual mortgage amount or amortization period, again there are considerations. For example, a longer amortization or a fixed payment variable rate can keep your payments down considerably and protect your cash flow. The big questions is what is more important for you? Paying down your mortgage or protecting your cash flow over the next few years before your next renewal?

5) Pulling Equity from your Home

If you don't like the idea of having your equity trapped in your home, especially if it's value has gone up considerably, there are options you should weigh carefully. If you need the money immediately for a reno, another investment or to consolidate debt, then a larger mortgage makes sense. If you are just looking for the possibility or option to access capital from your home then a home equity line of credit can make a lot of sense as no interest is paid for this option unless you actually use the line of credit.

6) Interest Rates

Although no one has a crystal ball, it is wise to have a handle on the overall economy and speak with a professional mortgage agent who studies the marketplace as part of their job. Mortgage agents are always aware of statements being made by the Bank of Canada and have an ear to the ground with all their lenders in the marketplace. If you really think rates will continue to go up over a two-to-four year period then a fixed rate might make sense; however if you have a strong educated hunch rates will come down over a fairly short period then staying with a variable will save you money and also position you better to lock in later when interest rates are better without too much of a penalty fee.

Conclusion

Making decisions at renewal time without talking to a professional and taking these considerations into account is doing yourself a disservice. Speak to a mortgage agent - you have nothing to lose! Mortgage agents, in most cases, do not cost you money as they are paid by whichever Lender you use.

ByleMortgages.com