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Your mortgage renewal and rising rates: what you should know

Mortgage renewals is a topic that has garnered a fair bit of media attention recently. And for good reason. Those facing a mortgage renewal in the coming months or even in the next year are rightly concerned about the impact higher rates will have on their monthly payments. 

However, it’s important to remember that there are options available to help reduce potential ‘payment shock.’ Below are just several strategies you can consider for an upcoming renewal…

Don’t panic. 

It’s easy to grow anxious when reading about rate increases and imagining the impact it may have on your own mortgage. 

But it’s crucial to be informed of the actual impact rate increases may have on your payments—and it could be less than you expect.  

For example, if you’ve got an existing 5-year fixed-rate mortgage at 2.00% and are facing a renewal rate of around 6.00%, that’s a tripling of interest rates. But that’s not to say that your payment will triple.  

In this scenario, your payment would rise by roughly 40%. And that’s before exploring other options to reduce the monthly payment. For example, if you re-extended your amortization from 20 years up to 30 years, the payment increase could be reduced to under 20%. 

Flexible amortization options

As noted above, lengthening your mortgage amortization is one strategy to consider. While this may result in paying more interest over time, it can significantly reduce your monthly payments, providing short-term financial relief without compromising your long-term financial security.

Adjust your budget for peace of mind

One proactive step you can take is to consider adjusting your budget in anticipation of a higher interest rate. By making small changes now, you can better manage your finances when your mortgage rate increases. We are here to assist you in creating a budget that aligns with your financial goals and eases the renewal process.

Making a lump-sum payment

If you’re in a position to do so, using investments or cash to make a lump-sum payment could also help reduce your monthly payments. I can work with your financial advisor to determine if it makes sense to keep your funds invested or use them for a mortgage prepayment.

Exploring other lender options

If your mortgage is insured (meaning you made a down payment of less than 20%), it may also be worth exploring other lender options. Unlike uninsured mortgages, which face re-qualification under the mortgage stress test in the event you choose to switch lenders, insured mortgages do not face such restrictions, although you would still be required to meet the lender’s own underwriting standards and qualification criteria. 

The value of working with a mortgage broker

We have access to a wide range of lenders and can negotiate on your behalf to secure the best possible terms. Importantly, we can hold a rate for you until the end of your term, protecting you from potential rate increases and providing peace of mind.

Reach out today!

In times of rising interest rates, preparing for your mortgage renewal is a proactive step toward securing your financial well-being. I want you to know that I’m here to support you every step of the way. 

If you have any questions, concerns, or simply want to explore your mortgage renewal options further, please do not hesitate to reach out. Call me today!
 



TMG
Tuesday, November 7, 2023

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