6 Things to Consider Before Renewing Your Mortgage in Toronto

Most mortgages in Toronto are taken out in five-year terms. They are then amortized over 25 to 30 years in many cases. You will be renewing your mortgage several times throughout your loan.

When you renew your mortgage, you will be able to stay with your current lender at the rate they offer, or you can switch to another lender that offers more favourable rates.

You will need to provide a copy of your property tax statement, your property insurance, a void cheque if you have switched to a new lender and a copy of the offer issued by your present lender.

You should prepare in advance and renew your mortgage when your current mortgage term ends. Many experts recommend getting a good head start to have ample time to prepare and compare and contrast lenders and rates.

The general rule of thumb is to begin four months before the end of your current term.

Facts to Consider Before Renewing Your Mortgage

You need to have a clear idea about your financial goals. Will you stay in your current position? Do you plan to have children? You can and should negotiate with your current lender to try to get a better mortgage rate.

You can lock in a competitive rate when you renew your mortgage to save money. Depending on your lender, you may switch from a variable rate mortgage to a fixed-rate mortgage, or vice versa, depending on your lender.

A fixed-rate mortgage will involve paying a fixed amount of interest each month until the end of your loan term. A variable rate mortgage may involve fluctuating interest rates depending on the prime rate.

Studies have shown that variable-rate mortgages tend to save homeowners more money over the course of their mortgage when compared to fixed-rate mortgages.

However, most homeowners opt for fixed-rate mortgages because they are stable and secure, allowing them to budget accordingly and enjoy peace of mind. Moreover, you may want to consider switching up the amortization period.

Your current financial situation, and future aspirations, may help you make up your mind easier. For instance, if you expect your lifestyle to remain relatively the same, a longer term may be the safer option, especially if you can lock down a great rate with your lender.

Conversely, if you prefer more flexibility, opt for a shorter term. Furthermore, you need to determine if you want to refinance your mortgage.

If you want to change any aspect or component of your current mortgage, you may be able to do so via refinancing. When you refinance your mortgage, you will essentially replace your existing mortgage with a new one with its terms and conditions.

Refinancing may be smart if you want to consolidate all of your debts to make repayments more convenient while saving some money in interest.

In addition, if you have built up sufficient equity in your home over the years, you may be able to tap into said equity via a home equity line of credit.

Your lender’s funds can be used to renovate or upgrade your home to help accelerate its appreciation and enhance its curb appeal. The choice is yours.

Another thing to consider when renewing your mortgage is trying to keep your mortgage payments the same, even with low-interest rates. You will be able to own your home much quicker, provided you can afford to make the current monthly payments.

As can be seen, renewing your mortgage is a multi-step process that should involve some serious thought and consideration with loved ones.

Why Should You Renew Your Mortgage?

If you want to make additional payments, you should consider renewing your mortgage. Your financial situation may have improved in recent months or years, so you may be able to make extra payments to reduce interest charges and own your home sooner.

Renewing may also be a prerequisite for refinancing with certain lenders, and switching to another lender may require you to renew your mortgage. What’s more, increasing the mortgage rate of your loan may also necessitate a renewal.

The First Step

Working with a mortgage broker will remove the risk of errors, expedite the renewal process, and possibly save you thousands of dollars, as brokers have access to resources and lenders that you may not be privy to.

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