Mortgage Renewal Ontario
Many first-time homebuyers in Ontario use a mortgage to finance their purchase. Most, if not all, of these mortgages come with an amortization of between 20 and 30 years. But you are restricted to taking loans with a maximum term of 10 years (applies throughout Canada). So when your mortgage term expires before you complete your mortgage repayments, you will need to renew that mortgage for at least one more term.
Mortgage Renewal in Ontario is Beneficial to both the Lender and the Consumer
Mortgage renewals essentially protect both the consumer and the lender. For the lenders, it prevents them from agreeing to a fixed interest rate for a couple of decades. Consumers, on the other hand, get an opportunity to change the terms of their loan that they are not happy with and cannot tolerate for the entire amortization period.
Renewal provides you with an opportunity to reexamine your monthly mortgage payment to assess whether it is suitable for your financial situation and lifestyle. For instance, you may be earning significantly more than when you first took your mortgage, and are considering making higher payments to pay down the principal sooner. Conversely, you may be thinking about paying for your children’s education and need to reduce your payments to a manageable level.
Renewal is an opportunity for you to get the best rates, but reports indicate that about two-thirds of homebuyers in Canada don’t change their mortgage terms during renewal. This is partly because of their busy schedules, and also due to the hidden costs, such as penalties for early repayment or charges for porting the mortgage to a different property in case you want to move.
Things to consider when planning your mortgage renewal in Ontario
The rules and steps for reviewing your mortgage renewal agreement in Ontario are consistent with other provinces across the country. You have a narrow window, between 180 and 120 days to the expiry of your existing loan’s term, to consider whether you want to renew your mortgage loan with your current bank. If you start the renewal process earlier, you may incur prepayment charges because you will be terminating your original mortgage plan early.
If all the payments have been on time, your renewal should be rather straightforward. But rather than simply signing the form and submitting it, it is important that you find out ways to cut down your interest costs, especially if they constitute a sizable chunk of your income. Start by looking at the rates of your current lender and comparing them with the competition.
Other things to consider when renewing your mortgage include:
- Prepayment options – If you can pay the principal amount early enough, you won’t have to pay any interest on it, which will have a major impact over the life of the loan;
- The terms and conditions offered by your bank and other banks with regard to the interest rate and closing costs;
- Short- and long-term goals – Things such as your child joining college, getting a promotion at work or starting a business, may all impact your ability to repay your loan, and should be considered in your renewal.
Why you need a mortgage broker for renewal
When it comes to finding the right mortgage renewal rates and options in Ontario that meet your future needs, Northwood Mortgage experts are your best resource. With access to the best offers from multiple lenders across the province, we can help you find a renewal option that will match your current and future needs.