(Oct 1, 2023)

Don’t want to miss out on the next blog post? Click Here to have future issues emailed directly to your inbox!

The maturity of your mortgage term can be both a moment of uncertainty and an opportunity for financial reassessment. As homeowners, we all reach this juncture sooner or later. So, what should you do when your mortgage is coming due? This blog aims to guide you through the essential considerations, options, and steps to help you make an informed decision that aligns with your financial goals and circumstances.

Assess Your Current Financial Situation by completing a mortgage application with an experienced mortgage broker

By completing a mortgage application with an experienced mortgage broker, you are inadvertently initiating the beginning stages of an in-depth personal financial assessment. Not only are you inputting your application details, but you are doing so into a powerful mortgage adjudication software that calculates your debt service ratios, net worth, and many other critical and eye-opening metrics. Additionally, upon completing your mortgage application, a mortgage broker will also inquire about and retrieve your most current credit rating – this is likely the most critical metric of all, as many people are often unaware that they may be trending in a negative direction that could ultimately damage their credit score and set them up for failure down the road. So, when your mortgage comes up for renewal, take advantage of this opportunity and, at the very least, engage with an experienced mortgage broker to summarize and offer perspective about your current financial standing. The end result is always positive; you either feel validated that you are on the right path, or, more importantly, you are happy that a weak spot has been identified so that it can immediately be remedied, thereby keeping your score on a positive trajectory into the future. Again, I cannot stress the importance of this—seize the opportunity of your mortgage renewal window and seek the services of an experienced mortgage broker for a free consultation.

Understand Your Mortgage Terms:

A mortgage broker plays a critical role in helping mortgage holders fully comprehend the intricacies of their existing mortgage agreement, including terms, conditions, interest rates, payment schedules, and potential penalties for early repayment. Mortgage brokers are well-versed in a wide array of mortgage products from various lenders, providing invaluable expertise. By not seeking the services of a mortgage broker and blindly accepting your current lender’s offer, you may miss out on countless opportunities and tailored solutions available to you. Utilizing a mortgage broker is undeniably in your best interest, take advantage of this opportunity and contact your go-to mortgage broker, or use it as an opportunity to start a relationship with a mortgage broker.

Explore Your Mortgage Renewal Options:

When your mortgage is coming due, one option is to renew your existing mortgage with your current lender. They will typically offer you a renewal package with terms and interest rates. However, this is also an opportunity to negotiate for better terms or explore other options with different lenders. Seek the services of a mortgage broker, this will guarantee more exposure to other lenders. More lenders equates to more offers which ultimately equates to lower rates!

Consider a Refinance rather than simply renewing:

Mortgage renewals, in contrast to mortgage refinances, involve maintaining your current mortgage balance and keeping the existing amortization schedule intact. During renewals, no other changes to the mortgage are typically allowed, including the addition or removal of individuals, increasing mortgage funds, or consolidating debts. It’s a straightforward process aimed at updating the terms and interest rate without altering the core structure of the mortgage. Requalification is not required, just a simple signature for acceptance.
In contrast, mortgage refinances offer a range of flexibility and options for mortgage holders. When refinancing, you can make several changes to your mortgage, such as extending the amortization period to reduce monthly payments, accessing extra funds to address outstanding debts, adding or removing individuals from the mortgage, among other possibilities. However, it’s important to note that choosing to refinance requires re-qualification, which entails providing updated income documentation and undergoing a credit check once again to ensure eligibility for the new terms and adjustments.

Use a Mortgage Broker!

Mortgage brokers deal with and represent several lenders, this is a huge benefit to you! Don’t simply take the word of your lender, they only offer their own product and rate…they are definitely aware of the competing offers, but they are not obligated to offer them to you. Many renewal offers state their higher posted rates rather than their fully discounted rates. Always call a mortgage broker to (at the very least) ensure that the rates that are being offered to you are even competitive. Make the call, you’ll be glad you did.

Is your mortgage coming due? Wondering what to do? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

Don’t want to miss out on the next blog post? Click Here to have future issues emailed directly to your inbox!

Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

Call Marko via WhatsApp!

Email: gelo.m@mortgagecentre.com

Facebook

@markogelo (Twitter)

Here are some outside the box approaches to consider when your mortgage comes due:

If you think that there is still some volatility ahead with interest rates and inflationary pressures, here is an approach to consider -> Renew into a 1 year discounted rate and at the same time, take the opportunity to consolidate any existing debt you may have (if need be). This allows you to rest easy with a fixed payment while analyzing the market trend in time for your next term selection. For example, rather than locking in to a 5yr fixed rate at 5.29% (today, August 2022), secure a 1 yr fixed at 4.09% with the hope that longer term interest rates will have stabilized and improved by the time your maturity rolls around in 12 months.

If you are of the mind set that the worst of inflation and rate hiking is behind us, then consider this approach -> secure a variable rate mortgage with a fixed payment feature. This will give you the flexibility to ride out any remaining rate increases without increases to your payment (unless rates unexpectedly continue to trend upwards in an aggressive manner which would thereby trigger the built-in payment reset for your mortgage…payments are fixed, but only to an extent). This strategy would also allow you to ride out the stabilization period with flexibility. As with all variable rate mortgages, you are able to convert to a fixed rate at any time without triggering a break penalty. In the event you need to sell your property, the variable rate mortgage calculates the smallest break penalty of all mortgage terms. Rather than having the potential of paying on the interest rate differential, variable rate mortgage break penalties are calculated based on a simple 3 months interest formula. This eliminates any possibility of a dreaded interest rate differential penalty which has the potential to be astonishingly substantial.

And finally, if you believe rate hikes still have a way to go then look to lock in to longer terms (2-4 year terms). Before deciding on the term length, consider the potential for any life events that may force you to consider a refinance or sell the property ahead of your maturity (change in marital status, change in employment status, having children, university tuition, etc). Disclose potential events that may occur in the future to your mortgage broker and engage in a conversation to discuss scenarios and outcomes before proceeding with a longer term mortgage.

And lastly, here is a direct measure that you can initiate with your next mortgage term that could provide immediate relief to your monthly payment in the event you required it:

Reset your mortgage to the maximum allowable amortization. For example, let’s say your current mortgage of $500,000 is coming due and your current rate is 2.69% with a monthly payment of $2,285. Rather than opting for the lender’s preferred renewal rate at 4.59%* which would initiate monthly payments over the remaining amortization period of 20 years, consider resetting the amortization to the maximum allowable limit of 30 years. Here is the difference:

Proceed with the lenders preferred rate of 4.59%* and maintain the current amortization of 20 years: $2,212/m, or

Request an amortization reset to 30 years and significantly reduce your payment to $1,820month**

*4.59% is a transfer rate. This means that you are simply transferring the mortgage to a new term and maintaining all original parameters of the existing mortgage (maintaining the same amortization, no debt consolidation, maintaining the same applicants, etc)

**5.19% is a refinance rate. This means you are making changes to the original mortgage parameters (changing the amortization, consolidating debt, etc). Therefore, this results in a rate increase.

Maintaining your current amortization is naturally the preferred pathway, but if you are at a time in your life where your monthly cash flow has reached a critical juncture, then take advantage of the extended amortization. Once things improve with your finances, simply increase your payments and get back on path to a lower amortization (lenders allow for annual payment increases and lump sum limits without incurring any penalty)

Tag: mortgage renewal options

What to do when your mortgage is up for renewal?

Assess Your Current Financial Situation by completing a mortgage application with an experienced mortgage broker

Understand Your Mortgage Terms:

Explore Your Mortgage Renewal Options:

Consider a Refinance rather than simply renewing:

Use a Mortgage Broker!

Contact Marko, he’s a Mortgage Broker!

Undecided about how to proceed with your mortgage renewal?

Here are some outside the box approaches to consider when your mortgage comes due:

And lastly, here is a direct measure that you can initiate with your next mortgage term that could provide immediate relief to your monthly payment in the event you required it:

RELATED ARTICLES:

Contact Marko, he’s a Mortgage Broker!