Key Considerations When Approaching Your Mortgage Renewal
Dwayne Kavanagh
Every Mortgage, Every Milestone: From Your First Home to Fifth Rental Property
When your mortgage renewal date is on the horizon, it’s not just another checkbox to tick off. It’s an opportunity to reassess your financial goals, adjust your mortgage to better fit your current situation, and potentially save thousands of dollars over the long term. Here’s what you need to consider as you approach this crucial milestone:
1. Review Your Current Financial Situation
Your financial situation may have changed since you first secured your mortgage. Perhaps your income has increased, you’ve paid off other debts, or your expenses have shifted. Now is the time to reflect on these changes and consider how they impact your mortgage needs.
Scenario: Imagine Sarah and John, who originally secured a mortgage five years ago. Back then, they were just starting their careers, and their income was modest. Over the years, they’ve both advanced in their careers, resulting in significant income increases. However, they also had a child, leading to additional expenses. As their mortgage renewal date approaches, they realize they can afford higher payments, which could allow them to pay off their mortgage faster. On the other hand, they also need to consider their growing family expenses. Sarah and John need to reassess their financial situation to determine the best mortgage strategy moving forward.
Are you maximizing your mortgage strategy based on your current financial standing, or is it time to make adjustments?
2. Understand Your Renewal Options
Your lender will typically send a renewal offer before your term ends, but don’t assume it’s the best deal. You have the power to negotiate the terms, shop around with other lenders, or even switch mortgage products. This is your chance to secure a more favourable interest rate or better terms.
Scenario: Alex receives a renewal offer from his current lender and notices that the interest rate is slightly higher than he expected. Instead of accepting it, Alex decides to shop around and compare offers from other lenders. He discovers that another bank is offering a lower interest rate and better terms. After negotiating with his current lender using this new information, they match the offer to retain him as a client. Alex successfully secures a better deal, saving money over the life of his mortgage.
Have you explored all available options, or are you simply accepting the first offer that comes your way?
3. Interest Rates: Fixed vs. Variable
Interest rates are a significant factor in your mortgage decision. With fluctuating economic conditions, the choice between a fixed or variable rate mortgage can make a big difference. A fixed rate offers stability, while a variable rate may offer savings if rates decrease.
Scenario: Maria and James are up for mortgage renewal, and they’re trying to decide between sticking with their fixed-rate mortgage or switching to a variable rate. They consult with their mortgage agent and analyze the current rate trends. While the fixed rate offers predictability, they see that the variable rate could save them money if interest rates go down. However, they’re also aware of the risks if rates rise. After considering their risk tolerance and financial goals, Maria and James decide to switch to a variable rate, planning to monitor economic conditions closely.
Are you comfortable with the potential risks of a variable rate, or would a fixed rate give you peace of mind in today’s economic climate?
4. Consider Your Long-Term Goals
Your mortgage is a tool to help you achieve broader financial goals. Whether you’re planning to pay off your mortgage faster, invest in other properties, or save for retirement, your renewal is the perfect time to align your mortgage with these objectives.
Scenario: Laura has been paying off her mortgage for several years and is approaching renewal. She recently started a small business and is considering expanding it. Laura’s goal is to become financially independent sooner, so she needs to decide if she should continue with her current mortgage plan or adjust it to free up funds for her business expansion. She realizes that extending her amortization period slightly could lower her monthly payments, allowing her to invest more in her business while still making steady progress on her mortgage.
Is your mortgage renewal strategy supporting your long-term financial goals, or is there a better approach?
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5. The Power of Prepayment Privileges
Many mortgages come with prepayment privileges that allow you to pay extra towards your principal without penalty. This can be a powerful way to reduce your mortgage faster and save on interest. During renewal, evaluate how you can take advantage of these options.
Scenario: Kevin has been diligently saving extra money each year, and he’s looking at ways to reduce his mortgage term. When his renewal comes up, he considers how he can use prepayment privileges to his advantage. His lender allows him to pay up to 20% of the original principal annually without penalties. Kevin decides to make a significant lump-sum payment from his savings, reducing his overall mortgage balance and shortening the amortization period, which will save him thousands in interest over time.
Are you fully utilizing your prepayment privileges to reduce your mortgage balance, or is there room to increase your payments?
6. Consult with a Mortgage Agent
The mortgage landscape is complex, and making the right decision requires expertise. Consulting with a mortgage agent can provide you with insights tailored to your unique situation, helping you make an informed decision.
Scenario: Robert is feeling overwhelmed with the choices he has to make during his mortgage renewal. He isn’t sure whether to opt for a fixed or variable rate, how to handle his prepayment options, or whether it’s worth switching lenders. To gain clarity, he reaches out to a mortgage agent who reviews his financial situation, discusses his goals, and presents various scenarios. With this expert guidance, Robert feels confident in his decision, knowing it’s aligned with his financial objectives.
Are you taking advantage of expert advice to navigate your mortgage renewal, or are you relying solely on your own understanding?
Final Thoughts
Renewing your mortgage is more than just a routine task—it’s an important step in managing your financial future. By taking the time to explore your options, consider your goals, and seek professional advice, you can make choices that align with your best interests and set yourself up for financial success.
As you approach your renewal date, ask yourself: Are you just renewing your mortgage, or are you renewing your commitment to your financial well-being? If you have questions about your mortgage renewal or need personalized advice, I’m here to help guide you through the process.
Ready to take control of your mortgage renewal? Whether you have questions or need personalized guidance, I’m here to help you make the best decision for your financial future.
Contact me today to schedule a consultation and let’s explore the options that will help you achieve your goals. Don’t leave your mortgage renewal to chance—let’s work together to ensure you’re making the most informed choice possible.
416-937-5991
FSRA License # M22004377Mortgage Agent - Level 2 at Mission 35 Mortgages FSRA License # 12844