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Tag: mortgage renewal

  • The Mortgage Renewal Process

    The Mortgage Renewal Process

    If you’re a homeowner, your mortgage is likely one of the most significant financial commitments you’ll ever make. The mortgage renewal process is a critical milestone that deserves careful consideration. This article will guide you through the steps you should take when renewing your mortgage, helping you make informed decisions that align with your financial goals.

    Understanding Mortgage Renewal
    Mortgage renewal is the process of renegotiating the terms of your existing mortgage agreement once your current term expires. In Ontario, mortgage terms typically last anywhere from one to five years. When your term is up, you have the option to renew your mortgage with your current lender or explore other options in the market.

    Renewal is an excellent opportunity to reassess your financial situation, review your mortgage terms, and potentially take advantage of better interest rates or terms. It’s not an automatic process; you need to be proactive and take the necessary steps to secure a favorable renewal.

    Why Mortgage Renewal Matter
    Mortgage renewal can significantly impact your financial well-being. Here are a few reasons why it’s crucial to approach it with care:

    • Financial Stability: Your mortgage is likely your most substantial financial obligation. Renewing at a higher interest rate or unfavorable terms could strain your budget and affect your overall financial stability.
    • Savings Opportunity: A lower interest rate can lead to substantial savings over the life of your mortgage. Mortgage rates can fluctuate, so renewing at the right time can save you thousands of dollars.
    • Customization: Renewal allows you to customize your mortgage to better fit your current financial situation and goals. You can choose a different term, payment frequency, or even make additional lump-sum payments.
    • Switching Lenders: You’re not obligated to renew with your current lender. Exploring other lenders may result in more competitive rates and terms, potentially benefiting your financial situation.

    Steps to Take When Renewing Your Mortgage
    Now that you understand the importance of mortgage renewal, let’s delve into the steps you should take to ensure a smooth and beneficial process:

    1. Start Early
    Don’t wait until the last minute to initiate the renewal process. Start at least four to six months before your current mortgage term expires. This gives you ample time to evaluate your options, research rates, and make informed decisions.

    2. Review Your Current Mortgage
    Begin by thoroughly reviewing your current mortgage agreement. Take note of your interest rate, remaining balance, term length, and any specific terms or conditions. Understanding your existing mortgage terms is essential for making informed decisions during renewal.

    3. Assess Your Financial Situation
    Evaluate your financial goals, income, and expenses. Determine whether your circumstances have changed since you first obtained your mortgage. Consider factors like job stability, family size, and other financial commitments. This assessment will help you determine the type of mortgage that best suits your needs.

    4. Shop Around for Rates
    One of the most crucial steps in the mortgage renewal process is shopping around for competitive rates. Contact multiple lenders, including your current one, to inquire about their renewal offers. Compare interest rates, terms, and any additional benefits or incentives.

    5. Negotiate with Your Current Lender
    Once you’ve gathered renewal offers from different lenders, don’t hesitate to negotiate with your current lender. They may be willing to match or beat the offers you’ve received from other institutions to retain your business. Negotiation can potentially lead to more favorable terms and conditions.

    6. Consider Your Mortgage Term
    Choose a mortgage term that aligns with your financial goals. Shorter terms typically come with lower interest rates but higher monthly payments, while longer terms offer stability with fixed monthly payments but slightly higher interest rates. Consider whether you want a fixed or variable rate mortgage based on your risk tolerance.

    7. Think About Payment Frequency
    Select a payment frequency that suits your budget and financial habits. Options typically include monthly, bi-weekly, or weekly payments. Making more frequent payments can help you pay off your mortgage faster and save on interest.

    8. Review Additional Features
    Pay attention to any additional features offered with your mortgage, such as the ability to make lump-sum payments or increase your regular payments. These features can help you pay down your mortgage more quickly and save on interest costs.

    9. Seek Professional Advice
    Consider consulting a Mortgage Broker for guidance. They can help you navigate the renewal process, provide expert advice on your financial situation, and connect you with lenders offering the best terms to suit your needs.

    10. Lock in Your Rate
    Once you’ve chosen a lender and agreed on the terms, it’s essential to lock in your interest rate. Interest rates can fluctuate, so securing your rate ensures you won’t be affected by any potential increases before your renewal date.

    11. Complete the Renewal Process
    After finalizing your mortgage renewal agreement, your lender will provide you with the necessary documents to complete the process. Review these documents carefully and seek legal advice if needed. Once everything is in order, sign the renewal documents to formalize the agreement.

    Mortgage renewal in Ontario is a crucial financial decision that can significantly impact your long-term financial health. By following these steps and taking a proactive approach, you can make informed choices that align with your financial goals. Remember to start early, assess your financial situation, shop around for rates, and negotiate with your current lender to secure the best possible mortgage terms. With careful planning, you can ensure that your mortgage renewal process leads to a more secure financial future.

     

  • You Might Pay More Than Expected to Renew Your Mortgage…

    You Might Pay More Than Expected to Renew Your Mortgage…

    New accounting rules adopted by the banks mean they’re paying closer attention than ever before to your financial situation and your home’s value when you renew a mortgage. Mortgage renewals used to be utterly routine – a virtual rubber stamp. Now, if your credit score has taken a hit or your home has fallen in value, you might not qualify for the best available rates. The new accounting rules are called IFRS 9; IFRS stands for International Financial Reporting Standard. One effect of these rules is to cause banks to pay close attention to early warning signs that clients may run into trouble paying their mortgage.

    “Let’s say the bank has noticed that your credit score went from 750 to 580 and/or your loan-to-value ratio has gone way up,” said Robert McLister, founder of RateSpy.com. “Anything that worsens risk in a lender’s eyes is going to potentially warrant a higher rate at renewal.”

    Mortgage brokers estimate that anywhere from fewer than 5% to 15% of borrowers may be negatively affected by the new rules. The borrowers most vulnerable to getting an elevated mortgage rate are in expensive cities, such as Toronto and Vancouver, where young owners must juggle expensive mortgages and daycare if they have children. It’s difficult to track what banks are actually doing because there don’t yet appear to be any standardized policies. But mortgage brokers report that banks are in some cases doing soft credit checks, which means peeking at your credit file to see whether your credit score has worsened. Banks may also do appraisals on renewal to ensure that the ratio of the amount of your outstanding mortgage to the value of your home is declining as it should be.

    The risk of having to renew at higher rates just keeps growing for these and other lenders. Well-discounted five-year fixed-rate mortgages are close to one percentage point higher than they were last summer. Also, we’ve seen the emergence of a trend where mortgage rates today are higher for some people than others. For example, someone with a down payment of less than 20% now gets a rate that on average might be 0.35 of a point better than someone who puts down 20% or more. Below 20%, the borrower is required to pay for insurance that protects a lender against default.

    Mortgage stress tests for borrowers also influence rates. The stress tests are designed to see whether you can afford mortgage rates that are higher than current levels. If you’re renewing a mortgage and want to move to a new lender, you must be able to pass the stress test. If you can’t do that, you’re stuck with a current lender that has no need to offer you its best possible discount. Today’s reality of home ownership is that that those financial struggles of home ownership matter. If your credit score drops or your home falls in value, there can be consequences.

  • Before You Renew Your Mortgage…

    Before You Renew Your Mortgage…

    The biggest monthly expense for most Canadians is their mortgage payment. Yet according to an Angus Reid survey, almost 27% of households automatically renew their mortgage when the term is up instead of trying to find a better deal. So, before you renew your mortgage, be sure to read these helpful tips…

    Get Going Early
    Start shopping around for a better rate four to six months before your mortgage is up for renewal. That’s the longest lenders will guarantee a discounted rate, says Vancouver’s Robert McLister, editor of Canadian MortgageTrends.com. “If your current lender’s rates rise, you’ve got your guaranteed rate to fall back on. If they drop, you simply renegotiate a lower rate.”

    Do Your Homework
    Before negotiating a lower rate from your bank, find out what other lenders are offering. Plenty of websites post current rates from all the banks, which can vary widely. A good one to look at is canadamortgage.com.

    Never Accept the Banks Posted Rate
    “If you don’t come right out and ask for a better rate, you won’t get one,” says Alan Silverstein, a real estate lawyer in Toronto and author of The Perfect Mortgage: Cutting the Cost of Home Ownership. He also notes that banks may be more willing to lower your rate if you transfer over other accounts or investments.

    Negotiate on Other Available Options
    Don’t just fixate on the interest rate. The amortization period, the rate type (fixed or variable) and the flexibility of the payment schedule can be crucial to lowering your costs.

    Change Lenders
    “A lot of people renew with their lender and don’t even think about switching to another one, despite the fact that they could do better,” says Silverstein. Note that there’s no penalty if you switch at renewal time.

    Broker a Deal
    If you don’t like negotiating and don’t have the time to research rates, a mortgage broker will do the legwork for you. This can save you valuable time and money! According to the Bank of Canada, people who use a broker usually pay less than those who don’t. Using a broker can typically save $1,670 of interest on a $200,000 mortgage over five years. “The results of using a good broker are twofold,” says McLister. “Better rates and a less restrictive mortgage.”

    Did you know?!?
    Saving even half a percentage point on your mortgage rate can save you up to $10,000 over 25 years (based on a $150,000 mortgage).

  • What to Consider Before Your Mortgage Renews

    What to Consider Before Your Mortgage Renews

    Have you explored all your options?
    Once you receive your mortgage renewal statement, there’s nothing easier than simply signing on for another term. But while this may make sense in many cases, your family or financial situation may have changed. We can look for opportunities that could better meet your needs.

    Are you comfortable with your payments?
    If you’ve been feeling financially strapped each month making your mortgage payments, this could be the time to reduce them to a more manageable level. On the other hand, if you’re earning more, why not pay down your mortgage faster, saving thousands in interest!

    Do you need cash flow for other things?
    Your priorities may have shifted since you first bought your home, and your cash flow needs to shift too. Things like paying for a child’s education, planning a career change, or a major purchase may call for spending money on things other than your home. You may be able to refinance your mortgage to take this into account.

    Can you handle fluctuating rates?
    Some homeowners are nervous about any hikes in interest rates, while others are comfortable to go with the flow. Rates are tough to predict. It’s best to base your decision on your personal situation, not what you read in the news. We can help you decide whether to opt for fixed or variable rates.

    Will you sell soon?
    If you are likely to sell soon, consider a shorter term mortgage or one that has more flexible terms so you’re not penalized if you sell your house before the mortgage comes due.

    Are you thinking about a major renovation?
    You know that projects such as a new kitchen or an addition can make your home more valuable. But the cost of having the work done can tie up a lot of money. Before you renew, look at all your financing options, which may include getting an additional line of credit or keeping your mortgage payments low so you can have money on hand to finance the renovations.

    When do you want to be ‘mortgage-free’?
    If you’re planning extended time away from work or perhaps an early retirement, it may make sense to pay down your mortgage sooner, rather than later. While increasing your payments will raise your monthly payments now, ultimately you will save on interest and can prepare for that fabulous mortgage-free lifestyle!

    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.

    Have your insurance needs changed?
    If your financial situation has changed since you first took out your mortgage, review whether you need the same level of insurance in place to cover mortgage obligations.

    Are you getting the best rates & terms?
    In a competitive mortgage environment, your good credit history can make refinancing work to your advantage. We analyze mortgage markets daily to ensure you don’t miss any money saving opportunities.