Most mortgages will need to be renewed at least once before they are paid off. A mortgage renewal is when you renew the balance of your mortgage for another term at a different mortgage rate. Unless you have the cash to pay off your mortgage in the first term, you are not alone, as 36.3% of Canadian homeowners who have a mortgage will have to renew it down the road.
It will be time to renew your mortgage when your current mortgage provider sends you a renewal slip in the mail. The slip will include a new mortgage rate, which you will have to sign and send back.
1. Your Current Financial Goals
It is a good idea to review your financial goals before you sign your renewal slip. You want to be sure your current provider is able to offer a mortgage product that best suits your needs. If you think you will stay in your home for the term that is currently on your mortgage, great. But if you know there’s a chance you will move in the next few years, you may want to look for a mortgage with a new term instead.
2. A Rate Hold
You can use a mortgage broker when looking around for a better rate. Rather than having to go to each lender individually, a mortgage broker can pull your credit report once and find a list of lenders with the best rates. Your mortgage broker can easily inform you of what rate you could qualify for if you choose to switch lenders.
However, if you aren’t ready to make a decision and if you want a chance to let your current lender match that rate, ask for a rate hold. Rate holds protect you from interest rate increases for up to 120 days and lock in the rate. If interest rates go down during that time, you can negotiate down to the new lower rate.
3. Give Yourself Time To Switch Lenders
If you decide to switch lenders you should start looking to remortgage as early as possible. You will need to submit a mortgage application as if you were applying for a new mortgage. This means you will need to provide the following documentation:
- Copy of your mortgage renewal letter
- Proof of income
- Proof you own your home
- Proof of property insurance
On average, it will take a mortgage broker over a week to process your application, so be sure to leave yourself enough room between when you start the process and when your mortgage renewal is due, otherwise, you may have no choice but to use your current lender again for your next mortgage term
4. Not Shopping Your Rate?
By not shopping around, you could be left financially vulnerable. This vulnerability is due to interest rate risk. Interest rate risk occurs when your mortgage is expected to renew at a higher rate, as this can place more financial stress on your budget. According to the Bank of Canada, in 2018 about 53% of households were subject to interest rate risk. Interest rate risk occurs in three scenarios:
- You have a variable rate mortgage
- You have a fixed-rate mortgage coming up for renewal
- You have a home equity line of credit with a variable interest rate
In these cases, renewing your mortgage at a higher rate could add hundreds of extra dollars to your mortgage payment. This could mean the difference between paying down debt and making ends meet. This is why it’s so important to take the time to shop around for the best mortgage rate.
Dominion Lending Centres NasaKasa
At Dominion Lending Centres NasaKasa we can help you with your mortgage renewal every step of the way! Call us 905.997.7001 or email us firstname.lastname@example.org for more information.