Residential: Is your mortgage up for renewal soon?
See it as an opportunity
Many Canadians will have to renew their mortgages in 2024. A mortgage renewal is an opportunity to seek better financial options – so take advantage of it!
Did your personal life circumstances change in recent years? Do you have new goals for the foreseeable future?
It is always a good idea to check if you now qualify for a better rate, a better term, or better conditions. Comparing various current available solutions before opting for the quick option of simply signing and retuning the mortgage renewal letter from your current lender may be smart choice.
Here are four tips to consider when renewing your mortgage:
- Get an early start and shop around: Begin preparing for your mortgage renewal not weeks but months before your contract ends. Contact your current lender even before you receive their renewal letter and ask what you can expect in a renewal offer. Then, start to examine what the competition can offer. Although it requires less effort to stay with your current lender, comparing offers from multiple lenders can save you a lot of money so it may be worth your while to invest the time.
- Deal with a broker instead of trying to negotiate alone – it is proven to save you money!
Connecting with a broker a few months prior to expiration of your current contract, will give the time to research, negotiate, provide supporting documents and get a commitment without stressing about missing the deadline.
- Know when a good mortgage rate is not enough: Consider factors beyond just the interest rate, such as:
- Pre-payment privileges
- Flexibility
- Portability
- Early termination penalty; how will the penalty be calculated in case you need to break the contract earlier.
Comparing how different mortgage offers align with your plans for the near future like job changes, starting a family, or moving homes, should influence your decision. This is where an independent mortgage broker who works with multiple lenders can really help.
- Opt for a new amortization: Extending your amortization period can lower your monthly payments, providing short-term relief from increased living costs. However, be aware that this may result in higher overall interest costs.
- Skip the mortgage stress test: Recent changes allow borrowers with existing mortgages to skip the stress test when renewing with a new lender. This promotes more competition among lenders and may lead to lower rates for mortgage renewal business.
Consider these tips to make the most of your mortgage renewal process and ensure it aligns with your financial needs and goals.
The Canadian Mortgage Charter
The Canadian Mortgage Charter (CMC) was announced by the government in fall 2023. Although it is not a law, it lays a set of regulations pertaining to what Canadians may expect throughout the mortgage finance process with the goal of addressing the housing affordability issues caused by rising interest rates, low housing supply and more.
Under CMC lenders would be required to notify the borrower about their renewal terms four to six months before the end of the current mortgage contract. In the past this time was much shorter, and lenders had to notify borrowers at least three weeks before contract expiration. This change allows borrowers to investigate affordable mortgage renewal options.
Moreover, the charter addresses situations in which borrowers facing exceptional budget constraints should be free to renegotiate a mortgage relief solution without paying the fees and costs associated with breaking a mortgage.
For more information, see the Department of Finance statement dated Dec 12, 2023.
What is the future of mortgages in 2024?
Current expectations predict that mortgage rates will stay the same for the first part of the year and will potentially lowered in the second part of 2024.
Only borrowers with variable-rate mortgages will be impacted by any changes to mortgage rate.
Fixed-rate mortgage borrowers are unlikely to be affected in the short term.
