But before you panic, take a deep breath! Here’s a breakdown of the situation and some steps you can take to navigate your renewal with confidence:
Why the Worry?
Rising Interest Rates: The Bank of Canada’s recent rate hikes have pushed mortgage rates upwards. This means your 2024- 2025 mortgage renewal rate will likely be higher than your current one, potentially increasing your monthly payments.
Stress Test: Qualifying for a mortgage has gotten tougher. Lenders use a stress test to ensure you can afford payments even if rates rise further. This could impact your ability to qualify for the same loan amount at renewal, especially if your financial situation hasn’t changed significantly. If you’re simply renewing though, this shouldn’t be an issue, as requalification doesn’t typically happen for renewals. If you’re looking for more money, or want to switch to a different bank, this can pose a problem for some.
Don’t Wait Until the Last Minute
The key is to be proactive. Here are some actions you can take:
Gather Information: Dig out your original mortgage paperwork and renewal notice (if you’ve received one). This will provide details on your current rate, term end, and any prepayment options making it easy to compare to other banks and lenders.
Estimate Your New Payment: Use online mortgage calculators to get a rough idea of what your payments might be at different interest rates. This will help you budget and prepare for potential increases well ahead of the change.
Talk to Your Broker: Discuss renewal options with your mortgage broker well before your term ends. They can explain your renewal offer and answer any questions you have.
Consider Your Options
Shop Around: Don’t just accept your current lender’s offer. Have your broker get quotes from other lenders to see if you can secure a better rate.
Renegotiate: If you have a good payment history and strong credit score, you may be able to negotiate a lower rate with your current lender. Often, this is the path of least resistance.
Break Your Mortgage: Depending on your situation, breaking your mortgage early to get a better rate with another lender might be an option, but there are penalties involved so weigh the pros and cons carefully. When assessing whether it’s worth it, the math doesn’t lie.
It’s Not All Doom and Gloom
Fixed vs Variable: Consider if a fixed or variable rate mortgage is best for you in the current climate. Talk to a mortgage professional for personalized advice.
Prepayment Options: If you have some savings, explore prepayment options on your mortgage. This can help reduce the principal amount owing, lowering your future payments.
Budgeting is Key: Regardless of your renewal rate, take a look at your overall budget. Look for areas where you can cut back to free up some cash to offset any potential payment increase. Most Canadians are having to do this right now.
By being informed, proactive, and exploring your options, you can take control of your mortgage renewal and navigate this financial hurdle with greater confidence.
For more information on mortgage rates, including forecasts for the remainder of the year and 2025, check out this other blog: Mortgage Rate Forecast
Contact us for a case-specific analysis and options for your upcoming mortgage maturity.
