Mortgage Renewal Advice
A Guide for Mortgage Borrowers
As a Canadian mortgage broker, we understand that over the next two years, close to $1 trillion of mortgages are up for renewal in Canada. This involves over two million mortgages.
Recent surveys show that many Canadian borrowers are stressed about their mortgage renewals. In the new higher interest rate environment this is understandable. The cost of servicing mortgage debt has gone up and, in most cases, it has gone up more than earnings and wages. This increasing cost of servicing debt is eating a larger portion of every borrower’s budget.
As a mortgage broker we cannot solve all the issues a customer faces due to high debt levels and high rates, but we can be of valuable service to borrowers with a mortgage renewing. One thing everyone should do is make sure you get the best deal you can on your mortgage renewal. Many mortgage advisors just want a quick deal and persuade you to take the deal that works best for them. A unique feature of Frank Mortgage is that we provide borrowers with choice. We show you multiple lender alternatives. Having this kind of choice allows you to not feel trapped at your current lender or compelled to take the mortgage option your advisor recommends.
It is in your best interests to do the math to understand what you can afford. You can use Mortgage Affordability Calculator to make an early assessment of what you can afford at today’s rates. You can also use Mortgage Payment Calculator to see what your mortgage payment might be at today’ rates. Understand this math and then find choice - real product selection - so you are well armed for such an important decision.
Whether you are dissatisfied with your current lender or simply looking for the best rates and terms, renewing your mortgage is a crucial financial decision. In this blog post, we guide you through the smart steps to take when your mortgage is up for renewal.
The Keys Things to Consider at Mortgage Renewal
1. Start Your Mortgage Renewal Process Early:
Begin the renewal process well in advance. This provides time to evaluate affordability, explore options, compare rates, and make informed decisions. Waiting until the last minute may limit your choices and put unnecessary pressure on you.
2. Assess Your Current Situation:
Evaluate your current finances. Consider your financial goals and assess any changes in your circumstances. Consider factors like income, expenses, and future plans. When evaluating your mortgage options focus on affordability. This self-assessment will help determine the amount of mortgage you can affordably manage and the type of mortgage that aligns with your current and future needs.
3. Distinguish Between a Mortgage Renewal, a Mortgage Switch, and a Mortgage Refinancing:
Renewing involves sticking with your current lender but renegotiating a new rate and mortgage term.
Switching means renewing with a new lender without renegotiating terms other than the rate and term of the new mortgage.
Refinancing means negotiating a new mortgage with different terms. Refinancing can allow you to extend your amortization period to lower the monthly payments or borrow more money.
A proper assessment of your financial situation and goals will help you decide which option suits you best.
4. Consult with a Mortgage Professional:
Engage the services of an experienced mortgage broker early in the process. A broker can provide personalized advice, shop around on your behalf, and negotiate with lenders to secure the best rates and terms tailored to your specific needs. Be sure to use a broker that deals with multiple lenders so you can see a variety of alternatives for your financing needs and have real choice in your mortgage decision.
5. Compare Mortgage Rates and Mortgage Terms:
Don't just settle for the mortgage renewal offer from your current lender. That would likely be the easiest thing to do but it is usually the most expensive. There are many lenders in the market willing to make competitive offers for your business. Use that to your advantage and seek out the best mortgage rates. Compare mortgage rates and mortgage terms from multiple lenders. A good mortgage broker, like Frank Mortgage, has access to multipole lenders and can access a wide range of options, ensuring you have a comprehensive view of the market.
6. Consider Product Choice:
Look beyond interest rates. Consider the mortgage product that best aligns with your financial goals. Things to consider include fixed or variable mortgage rates, open or closed terms, prepayment flexibility, portability, payment frequency, etc. You may have personal circumstances that require a deeper look at the mortgage beyond just the mortgage rate.
7. Extended Amortizations:
With a mortgage renewing in 2024, you are likely to end up with a higher rate and, therefore, a larger mortgage payment. One way to reduce your mortgage payment is to extend your mortgage amortization. This requires you to undergo a mortgage refinancing and it will extend the amount of time it will take you to pay off your mortgage. So, there is a downside. But it might provide you with more manageable monthly mortgage payments, offering financial relief in the short term.
8. Think about interest rate risk:
Too many borrowers made bets on interest rates back in 2021 and 2022. Most regret that now and it has cost them dearly. The lesson is that it is best not to try to predict where mortgage rates are going. They may decline in 2024 but over the long term they may remain elevated and could even be higher than they are today. This is all speculation, but you should try to not expose your home to rate risk – leave that for your investment portfolio. Take the best mortgage rate and the mortgage term that gives you peace of mind and a mortgage you can afford. Doing this allows you to not worry about where rates are going every day.
9. Seek Personalized and Timely Service:
Choose a mortgage broker and/or mortgage lender that places the customer first. Many mortgage brokers are focused on making a commission as their priority. Make sure the mortgage broker you use focuses on your outcome as their priority. Personalized attention and timely responses to your queries can significantly enhance your mortgage experience. A dedicated mortgage broker with the right customer-first approach can help you navigate this process smoothly.
10. Stay Informed:
Keep yourself informed about market trends, interest rate movements, and changes in lending policies. Traditional mortgage brokers and lenders are not good at keeping their customers up to date with current information. In a recent market survey only 23% of borrowers found out about market events, like interest rate increases, from their mortgage broker. This is poor service. More modern mortgage brokers, like Frank Mortgage, provide regular updates to their customers so they can stay informed and educated about the mortgage and housing markets. Being aware of market events will empower you to make informed decisions.
Conclusion
Renewing your mortgage is a pivotal financial decision that requires careful consideration. By starting early, seeking professional advice, and exploring all available options, you can secure the best mortgage rate and terms for your mortgage renewal. The ultimate decision at mortgage renewal is yours to make so stay informed and do your homework. A little preparation goes a long way to finding the best outcome. Remember, a mortgage broker is your ally in this journey. The best mortgage brokers in Toronto, Vancouver, Calgary, Winnipeg, Ottawa, Halifax, all across Canada, provide personalized service and access to a wide array of choices. An informed decision at renewal can set you up for financial security and peace of mind with your home.
Don Scott
Don Scott is the founder of a challenger mortgage brokerage that is focused on improving access to mortgages. We can eliminate traditional biases and market restrictions through the use of technology to deliver a mortgage experience focused on the customer. Frankly, getting a mortgage doesn't have to be stressful.
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