When interest rates are increasing as they are today, many home owners are not looking forward to mortgage renewal time.
It means that you'll probably be resetting your mortgage at a higher rate, with higher regularly scheduled payments.
But, you always have options! Would it be a good idea for you to renew right on time to keep away from considerably higher rates? Or maybe consider refinancing to bring down your regularly scheduled payments?
We'll address these frequently asked questions and more to approach your next mortgage renewal with confidence.
How soon can I renew my mortgage?
It is recommended to begin considering your mortgage renewal somewhere around a half year before the end of your term. This allows you to have a chance to talk to us about your circumstances and shop around if you're not content with your current lender's offers. There are lenders that allow you to renew as early as half a year. This means that depending on the lender, we can begin the process and secure your rate as far as 10 months out, which could be quite significant assuming that rates will continue to increase.
Would it be a good idea for me to renew right on time to beat increasing rates?
In the event that you're wanting to secure at the present rates early — over 4 months ahead of your renewal date — to beat any further rate increases, you could face a prepayment penalty for ending your agreement early in the event that the lender doesn't have an early renewal option. For this situation, we'll have to figure out if this would make sense financially.
Would it be a good idea for me to accept my current lender's renewal offer?
Anybody with experience negotiating knows to research the first offer you get. While it could be enticing to just easily sign the dotted line, you'll possibly be leaving cash sitting, with a better renewal rate possible with a little bit of negotiation.
If you were to switch to a different lender for a better rate, simply ensure your lender can't call your bluff. Because of government regulations, you would need to be stress-tested at the current rate of 5.25%, or the rate offered by your lender plus 2% - whichever is higher.
If you do plan to shop around, ensure that your financial situation hasn't changed and that you'll have the option to easily re-qualify with a different lender.
Should I refinance?
In the event that you are facing a significantly higher rate at renewal and are stressed over the increase in your regularly scheduled payments, refinancing your mortgage is an option and it can be done on your renewal date, generally without penalties. You'll be taking out a brand new mortgage, complete with a new rate, new term and perhaps another amortization period. Expanding the amortization allows you to pull out funds for renovations, investments, and more, or bring down your regular monthly payments to improve cash flow.
We'd be happy to help!
If your mortgage renewal is coming up this year, let's review your options together! We would love to go through any questions you may have and guide you through your renewal process.