Expert Advice – Mortgage Renewal

Renewing Your Mortgage – Bank Or Broker?

By Paul Hudson at paulhudsonmortgages.ca

We all have busy lives, so signing the mortgage renewal form your financial institution mails you is certainly one way to deal with your largest financial commitment, but is this the best way to manage your finances?  Lots can comes into play when your mortgage renewal arrives in your mailbox. Below are two questions addressing few things you need to consider before signing a new mortgage contract.

Are You Getting The Best Rate & Term?

It has likely been five years since you thoroughly reviewed your original mortgage paperwork. Although you may know your interest rate, do you recall all of the terms of your mortgage? Chances are, the interest rate offered on your renewal forms will be higher than what you would have been offered had you walked though the front door of your financial institution and requested a new mortgage. In fact, this issue has become better known to the public in recent years, and can be addressed by your mortgage broker. What does not tend to get as thoroughly reviewed however, are your mortgage terms. Understanding important terms including your annual lump-sum payments allowable, how your pre-payment penalty is calculated and your ability to port your mortgage to another property is paramount (especially if you decide to move in the future and your purchase date doesn’t line up within 24 hours of your sale date).

Have Your Circumstances Changed Over The Past Five Years?

Moving from your old home to your new home is only one thing you may be considering after five years. Other life changing realities you may be facing include home renovations, starting a new business, borrowing to invest or funding your kids’ post secondary education.  Is your current mortgage set up to help you easily achieve these goals? Perhaps you want to borrow to renovate and want to pay off your renovations over five years rather than lumping these costs with your existing mortgage, which may be amortized over 20. In the case of borrowing for your business or for investing, consulting with your accountant or financial planner in conjunction with your mortgage broker is a savvy way structure your mortgage so you can take advantage of tax benefits. Finally, setting up a portion of your mortgage to help finance post secondary education can be a cost effective move for you. Is the representative at your financial institution taking these needs into account when you renew?

Although the government of Canada has taken steps to limit the way financial institutions lend, for the majority of homeowners, borrowing money against a residential property is still relatively easy.  Knowing how to structure your mortgage and choosing the most suitable mortgage term are the keys to your financial success. Before signing your next mortgage renewal, ask yourself the two questions above and ensure they are completely answered, before you put ink to paper.