March 21, 2013
By law, your financial institution must send you a statement outlining the details of your mortgage renewal at least 21 days prior to the expiration of your term. In this document, you will find all the information pertaining to your mortgage. The financial institution will also provide you with a renewal offer and will outline the new conditions for your loan.
We suggest that you begin the renewal process ahead of time, as you could lose opportunities to lock in at a more advantageous interest rate. It is thus strongly recommended to begin the process about 4 months in advance.
Doing business with your mortgage broker
Your mortgage broker will guide you through the next stages of your renewal and will help you make an informed decision based on your particular circumstances. It is likely that since the signing of your mortgage 1, 5 or 10 years ago, your financial situation has changed drastically. Your life has evolved and your needs are no longer the same. It is therefore necessary to take the time to re-evaluate your objectives in order to determine the best mortgage product for you. There are vast arrays of options available and a mortgage broker will help you choose the product best suited for you. To help with this process, you need to ask yourself a few questions:
- What can you afford to pay per month?
- Do you need cash for renovations, to pay for your children’s education or make a major purchase?
- Can you withstand rate changes?
- Are you thinking about moving soon?
- Do you want to pay down your mortgage faster?
- Are you satisfied with your current lender? Is the offer meeting your needs?
All these questions will be used to determine which product will be best suited to your situation: variable rate, fixed payment, line of credit, refinancing, prepayments, etc. You will then be ready to determine what your needs are for your mortgage renewal.
Is it possible to renegotiate your mortgage before the term is over?
Yes, it is possible to renegotiate your mortgage before it comes to term. If your mortgage no longer meets your needs or if interest rates fall, you might want to renegotiate your mortgage contract ? that is to modify the terms of your mortgage. But first, you must determine if it’s worth the effort or if there are other solutions that better meet your requirements.
Ask your lender if you can cancel your contract. If the financial institution allows you to effectively terminate your mortgage contract, it may impose a penalty and other fees.
If you must pay a penalty, the conditions will be outlined in your contract. The penalty fees are usually calculated from your interest rate and can be several thousand of dollars.
To find out how much your penalty will be, contact your lender.
Weigh the benefits and the risks
With the information at hand, you can decide whether it’s beneficial for you to pay the penalty in order to take advantage of a lower interest rate. These savings could allow you to renovate, contribute to your children’s education, acquire a secondary residence or consolidate your debts. Weigh the benefits and the risks:
- You get a lower rate and potentially lower payments.
- If you keep the same payment as with your current agreement, you will be to able pay off your mortgage sooner.
- You can lock in the lower interest rate for the new term of the mortgage.
- If there is a penalty, the cost could be more than any savings that you might get.
- The interest rates may continue to go down, in which case you would not lock your new mortgage in at the lowest rate possible.
A mortgage broker is able to help you assess your options. You can decide together the best strategy to adopt.
Make an informed decision on your renewal!