Posted onDecember 28/2015
Mortgage renewals can either be a nightmare or a dream come true, depending on which lender you work with and what the market is doing at the time of the renewal. Many homeowners, especially those new to the scene, make the mistake of not capitalizing on significant rate drops. If you have the opportunity to refinance to a lower, fixed-rate mortgage, it is usually in your best interest to do so.
1-2% may not equate to huge savings in the short-term, but the results are drastic over decades. You deserve to get the most out of your investment; by adhering to the following tips, you stand a great chance of saving thousands down the road!
Handling your mortgage renewal the right way
- Start planning for the renewal at least four months in advance
You want to give yourself plenty of time to research every available lender and product. While this is always true, it is vital at times when rate hikes are expected, such is the case in Canada currently. With mortgage APRs predicted to increase 1.25 percentage points in 2016, finding the ideal lender/loan combination is imperative.
- Understand the difference between fixed and variable rates
Every type of mortgage carries with it a level of risk; determining which type is best for your individual situation is the main challenge. With a fixed APR, you have the peace of mind knowing your rate will never increase. However, this also means it can never go down, even if prime takes a dive. On the contrary, variable rate mortgages change with the ebbs and flows of the economy; in turbulent times like right now, these borrowers are suffering a bit of a loss. However, the market is always subject to change.
- Assess and adjust your amortization period if viable
The longer you pay on your mortgage, the more interest you will be compelled to pay. Trimming your loan period by even a couple of years can save a bundle on these charges.
- Alter payment frequency
Making bi-weekly payments can lead to a considerable reduction in the life of your loan, since it essentially equals one extra monthly payment per year. Ask your lender about the options available in this regard, including whether or not they offer accelerated weekly payments.
- Buy insurance to protect your assets
This can come in the form of mortgage or life insurance, but both are guaranteed to provide a critical financial safety net in the event of a major life change or emergency.
Read, research, review, and compare. These four steps will prevent you from making a big mistake when it comes to renewing your mortgage. Ask plenty of questions and ask around; remember, it is your money on the line.