Approximately half of Canada’s current mortgage landscape is set to undergo renewal in 2025 or 2026, a consequence of the unprecedented real estate surge during the COVID-19 pandemic, marked by historically low interest rates.
Analysts anticipate a staggering $251 billion in mortgages necessitating renewal in 2024, followed by an additional $352 billion in the subsequent year.
With the majority of these mortgages poised to face higher interest rates, borrowers should proactively strategize to effectively manage their mortgage commitments. As your existing mortgage approaches its maturity date, it becomes crucial to engage in renegotiation. This provides a strategic window to determine a new term length, negotiate a revised mortgage interest rate, and potentially consider transferring your mortgage to a different financial institution.
Most federally regulated lenders are required to present a new mortgage offer at least three weeks before the maturity date if they plan to renew your mortgage. However, renewal is not obligatory in case of changes in your circumstances or a late payment history.
Surprisingly, statistics reveal that over 50% of homeowners opt to renew their mortgage with the existing lender without entering into negotiations. This lack of negotiation doesn’t encourage lenders to offer the most competitive rates during renewal. Lenders often rely on the assumption that borrowers may not explore other options or may prefer to avoid the process of applying for a mortgage with a new lender.
Choosing to accept the mortgage renewal offer without exploring alternative options may not be the most advantageous decision. While sticking with the current lender may be convenient and avoids the hassle of providing new documents, exploring alternatives has the potential to yield better rates and terms, potentially resulting in significant savings in interest costs.
Before signing a mortgage renewal offer, consider the following questions:
- Have you explored all your options? A mortgage agent can identify opportunities that better align with your current needs.
- Do you need cash flow for other purposes? Priorities may have changed since purchasing your home, and refinancing your mortgage can accommodate shifts in cash flow needs.
- Can you handle fluctuating rates? Consider your comfort level with interest rate changes and tailor your mortgage renewal based on your personal situation.
- Will you sell soon? If selling is on the horizon, explore shorter-term mortgages or those with flexible terms to avoid penalties.
- Are major renovations in your plans? Before renewing, assess financing options, such as an additional line of credit or maintaining lower monthly mortgage payments for renovation funding.
- When do you want to be “mortgage-free”? Factor in life events like extended time away from work or early retirement when deciding on mortgage repayment timelines or restructuring.
- Could you use home equity for other goals? Mortgage renewal offers a chance to review options for accessing cash for various purposes, including buying another property.
- Are you getting the best rates and terms? A mortgage agent can help you navigate the competitive market, ensuring you don’t miss money-saving opportunities due to your good credit history.
Collaborating with a mortgage agent provides access to a diverse range of mortgage options from different lenders. This guidance aids in shopping for the best rates and understanding the terms and conditions associated with each mortgage product. Making an informed decision aligns your mortgage choice with both short-term and long-term financial goals.
If you would like to chat about your upcoming mortgage renewal and are wanting to see what options might be available, feel free to book a time in my calendar. calendly.com/holtonmortgages Alternatively, you can email me at: [email protected]