Renewing in a Higher-Rate Environment

I’ve been getting a lot of questions lately about mortgage renewals – not surprising, given the steady rise of mortgage rates over the last couple of years. People with mortgages renewing in 2023 and even 2024 are justifiably concerned about what their new mortgage will cost, what impact it will have on their cash flow, and whether or not they will even be able to pass the stress test with today’s rates! Far too many people go into auto-pilot mode when it’s time to renew their mortgage and will often just accept the renewal offer, they get from their current lender. It’s temptingly easy and in some cases, it may even work out well, but in our current environment, this is a risky and potentially costly misstep. The reality is, if you’re coming up to the end of a 3-, 4-, or 5-year term, you will be renewing at a significantly higher rate which means a higher mortgage payment and an increase in your total cost of borrowing. And while we may not be able to control interest rates, there are some ways to minimize your cost increase in the short term.

HERE ARE SOME TIPS TO HELP YOU NAVIGATE THE MORTGAGE RENEWAL PROCESS IN A HIGHER-RATE ENVIRONMENT:

1. A good end result starts with a good plan. I can’t emphasize enough how important it is to start the process early. Get in touch with me so we can take the time to review your file. There might have been some significant changes in your life and your financial picture since we negotiated your previous mortgage so it’s always a good idea to discuss your priorities, concerns, wishes, etc.
   
2. Don’t assume that your current lender will offer you the best rate or terms for your renewal. There may be a product from a different lender that’s better suited to your current needs, or another lender might be offering a better rate. If your current lender sees that you are considering all your options, they may even be inclined to make their offer more attractive to keep your business.
   
3. Consider a shorter-term or a variable-rate mortgage. If you’re worried about locking in a high fixed rate for a long term, it may make sense for you to choose a shorter term and “wait and see” what mortgage rates look like in a year or two. Or, we could look at a variable rate. A shorter term will allow you to renew more frequently and take advantage of lower rates if they drop in the future. A variable rate will fluctuate with the market and may save you money if rates go down. But since no one can predict what rates will do, both options come with some risks and uncertainties. Together, we can discuss the pros and cons of either option before you make a final decision.
   
4. Pay down your principal as much as possible. One of the best ways to reduce the impact of higher rates is to lower your outstanding balance. The less you owe, the less interest you will pay. You can pay down your principal by making lump sum payments, increasing your monthly payments, or choosing an accelerated payment schedule. I can review your mortgage contract with you so you can take full advantage of your prepayment privileges without triggering any penalties.
   
5. Repeat #1. Call me – the sooner the better! As an independent mortgage professional, my job is to find the best mortgage solution for your needs and goals. I have access to a wide range of lenders and products that may not be available to you directly. I can also provide you with unbiased advice and guidance throughout the renewal process. Whether you want to stay with your current lender or switch to a new one, I can help you negotiate the best possible terms and conditions for your renewal.

Like any important financial decision, renewing your mortgage requires careful consideration and it’s not something you want to do while under time pressure. And this advice doesn’t just apply at renewal time – if you want to discuss debt consolidation strategies, if you have a large expense coming up and want to explore financing solutions, or if you want to review your overall mortgage strategy, don’t procrastinate! Contact me today and let me help you achieve your financial objectives – at renewal or at any point during your mortgage term.

Jean LaMarche, AMP