Interest Rates Are Up… Now What?

For many Canadians in the past, receiving a mortgage renewal letter was an important milestone in their homeownership journey. A mortgage renewal provides an opportunity to reassess your financial situation, explore better options, and potentially save money. With household debt on the rise and interest rates currently sitting at a 22 year high, not only is the option of saving money when renewing gone, but many homeowners are instead wondering if they can afford the mortgage payment increase that is lurking around the corner. So now what?

It’s time to do our homework. If you notice above, I mentioned a renewal was not only about potentially saving money but also about reassessing if your mortgage is currently meeting your short- and long-term financial goals. When you receive a mortgage renewal letter from your current lender it is important to note that it is an OFFER. This means there are options. Do nothing and you will receive what is offered. Do your research and you will know what else is available, who can offer it and how to secure it. This is important in ensuring you have leverage to negotiate the best deal. Here are the steps you should consider when preparing to renew your mortgage.

1.    Review the Renewal Letter Carefully

When you receive a mortgage renewal letter, it is crucial to read it thoroughly and understand its contents. Pay close attention to the renewal terms, interest rate, and any additional fees or penalties mentioned. Especially, take note of the renewal period and the date by which you need to respond to the lender. This information will serve as a foundation for your decision-making process.

2.    Assess Your Current Financial Situation

Before making any decisions, take a step back and evaluate your current financial situation. Consider factors such as changes in your income, expenses, and credit score since you first obtained your mortgage. This self-assessment will help you determine whether your needs and goals have changed.

3.    Consider Your Long-Term Goals

When assessing your mortgage renewal options, consider your long-term financial goals. Are you planning to pay off your mortgage sooner? Do you need flexibility in payment schedules? Would you benefit from switching to a different mortgage term or type? Understanding your goals will help you align your mortgage renewal decisions with your overall financial plans.

4.    Do your Mortgage Research and Do it Early

Prepare, Prepare, Prepare.  Mortgage renewal is an ideal time to compare rates and learn about the different types of features available with different mortgages. Reflect on your past mortgage term. Was the term too long, too short? Was the type of mortgage (Fixed or Variable) right for achieving your goals? Did you utilize prepayment options? Was your lender readily available to answer questions or resolve issues? Don’t wait until your mortgage renewal date is upon you to begin seeking alternative products. Have your options ready for when it’s time to negotiate that offer!

5.    Consult with a Mortgage Professional to do your Shopping

Reach out to a mortgage broker to explore competitive rates and terms available in the market. Mortgage brokers can help you navigate the options available, provide insights into the market, and offer personalized advice based on your unique circumstances. As a mortgage agent, I have access to 50+ lenders and can compare interest, terms, mortgage type and scenario from one access point.

6.    Negotiate

Once you receive your renewal letter don't be afraid to negotiate or ask for a better rate. If you have already spoken with a mortgage professional, you will know if the renewal offer is a good one. Remember, even a slightly lower interest rate can result in substantial savings over the life of your mortgage.  If you decide you want to switch lenders, a mortgage broker can facilitate that transaction while making sure it is an informed decision that aligns with your financial objectives.

Now more than ever, taking time to review, plan and consult is imperative to ensure you are set to weather the next few years of higher payments. Remember, taking the time to understand your options and make an informed choice during mortgage renewal can have a significant impact on your financial well-being in the long run.

To discuss any of these steps in depth please reach out at askangela@perfectplans.ca. I would love to hear from you! Lets create the perfect plan together.