Tuesday, February 28, 2023 / by Evelyn Lopes
MORTGAGE RENEWAL & FINANCING TIPS | HOW TO SAVE MONEY
Is your mortgage coming due and you are concerned because of the higher interest rates? There are actions that you can take if you find that your mortgage rate is too high for your comfort level upon renewal.
With increasing and higher mortgage rates many homeowners are feeling stressed.
Are you wondering what you can do, if you find that your mortgage rate is too high upon the renewal date? Are you dreading the thought of paying higher mortgage rates upon renewal? Are you struggling to keep up with your mortgage payments?
Are you feeling…. overwhelmed?
You’re not alone!
The good news is… you can take several actions to control the situation, lower your monthly costs, save money and reduce your stress!
Sound helpful?....Then check out this blog!
With the rapid rise of interest rates over the past year by the Bank of Canada as they tried to curb inflation, we saw many homeowners who were at a variable rate or who are coming up on their mortgage renewal and are now facing; higher mortgage rates, which means higher monthly payments. This combination can make it challenging for homeowners to keep up with their payments, the situation they find themselves in, unfortunately causes a lot of financial stress.
If you're like most homeowners, your mortgage is one of the biggest expenses you'll ever have. And when it comes time to renew your mortgage, you want to make sure that you're getting the best mortgage renewal rate possible. Unfortunately, sometimes circumstances change, and your mortgage rate may end up being higher than what you expected and what you can comfortably afford.
Don’t panic, there are several options available to you that can help you lower your mortgage rate and/ or lower your monthly payments which in turn will alleviate some of this stress.
In today’s video, we'll reveal some little known secrets that can help you renegotiate your mortgage. We’ll explore some of the most effective strategies that you can use to reduce your mortgage payments, negotiate with your lender, and even refinance your mortgage to get a better rate and or lower monthly payments. By the end of this video, you'll have a clear understanding of what options and steps you can take to regain control of your finances and reduce the burden of higher mortgage rates.
So, whether you are a first time home buyer, a seasoned home owner or an investor facing higher mortgage rates on renewal, or payments that you’re struggling with or you know of someone in this situation, this video is for you! So, grab a pen and paper, and let's dive in!
If you find that your renewal mortgage rate is high and is causing you stress, here are some actionable steps you can take to reduce your mortgage rate, lower your mortgage payments, and make your mortgage more manageable. Yay!
Have you got your paper and pens ready?
Let’s go – 8 tips for your mortgage renewal or refinance
1. Shop around for Shop around for competitive rates. The first step to lowering your mortgage rate is to shop around for competitive rates. Contact multiple lenders, including your current lender, to see what they can offer you. Compare the rates and terms and negotiate with them to get the best deal possible.
2. Consider using a mortgage broker. When shopping rates, the financial institutions will need to pull a credit bureau. Having several credit pulls will affect your overall credit rating, so if this is a route you are looking to take, you may want to deal with a mortgage broker who can pull one credit bureau and then shop and negotiate on your behalf to get you the best possible rates and terms. They can also help you understand the conditions of your mortgage and provide advice on your options. It is always best to consult with a professional.
3. You can ask your financial institution if they can extend the mortgage renewal date by 3-6 months. Rates have risen steadily over the past year and many believe that we are at or close to the peak, so if you can get an extension on the mortgage renewal date, you may be fortunate enough to land within a period of lower interest rates than are currently available at the revised renewal date. But note that no one knows for certain what will happen in the future, so in this instance we are hoping for lower rates in the 3-6 month postponed renewal period but that can not be guaranteed so it is a chance we are taking.
4. You can ask to extend your amortization period. If you currently have a shortened amortization period of say a 15 or 20 year amortization you can request a 25 or 30 year amortization period which will lower your monthly payments. Extending your mortgage term can lower your monthly payments, but it may also increase the overall cost of your mortgage. This is a good option if you need to reduce your monthly payments, but it’s important to understand the long term implications.
5. If you have a cash flow issue, you may be able to move into a line of credit. By moving into a line of credit, you can access some extra funds to pay your mortgage payments and you would only have to pay interest only on the line of credit. Note this is only a short term fix for a short term cash flow problem.
When buying a home, it would be helpful to know What is your Home Buying Power? Check out my video What is Home Buying Power to learn more. I will put the link in the comments below. How to Calculate Your Home Buying Power. I will put the link below. ??
6. You can take out some of the equity in your home or refinance to a lower mortgage payment. Again this is a short term fix, because you still have to pay back the debt which will now be higher. This solution works well if you are expecting some money in the form of a bonus, tax refund or inheritance, a relatively large lump sum payment. You can use those funds to pay back the equity line. You need to have an exit strategy. We don’t want to be using our homes and the equity that they have built up as an ATM machine. Be responsible with your home equity- it’s your nest egg
7. Paydown your mortgage. If you have extra funds, consider using them to pay down your mortgage. This can reduce the overall amount of interest you'll pay, and potentially lower your mortgage rate at renewal.
8. Liquidate. If you feel that the entire situation is too much for you to handle, you can always liquidate your assets. You likely have equity built up within your property, so don’t just walk away and stop paying your payments. Speak to your lender, let them know that you have decided to liquidate your asset, and sell the property. With the proceeds of sale you can pay off your debt and hopefully have a little left over. If you are having trouble making payments, talk to your lender, try and make some interim arrangements. This route will give you some time to sell, it will likely save your credit rating, reduce your stress and hopefully you will have some funds left over to move on to a new chapter in life. I have seen where people just stop paying their payments- not a good idea. Instead use these options and put yourself in a better financial situation.
So there you have it, 8 tips to help as you renew or refinance your mortgage. The good news is that there are strategies that you can potentially use to help you deal with higher mortgage rates. By taking these steps, you can potentially lower your mortgage rate, save money on your monthly payments, thereby increasing your monthly cash flow and... giving you some breathing room.
These are some of the ideas you can implement. I would strongly suggest reaching out to your lender or mortgage broker. They will know your particular situation on a deeper level and would be able to give you the best advice and options for your particular situation.
Hopefully this video gave you some ideas, hope and a better understanding of what you CAN do to actively take charge of your circumstances, reduce your mortgage payments and make things more manageable. Lenders don’t want you to go into default, so reach out to them and try and negotiate a win, win outcome for the both of you.
If you have any questions or would like a referral to a great lender you can reach me at 905-965-5902.
My name is Evelyn Lopes with The Evelyn Lopes Realty Team and I’m here to help!