You work hard for your money. One of your biggest expenses is likely your mortgage. So if you had the opportunity to improve the interest rate, alter the term or otherwise make your mortgage a better fit with your life and finances, wouldn’t you take it?
Far too many Canadians do not act on this opportunity when the term of their mortgage expires. They simply renew with their current lender, without seeking better terms or shopping around for a better deal. This, despite the fact that household circumstances often beg for a change in what is often the single-largest expense in the family budget.
Assess your situation
Your lender must provide you with a renewal statement at least three weeks before the end of the existing term, but it’s best to act sooner. A few months before the end of the term, ask yourself some tough financial questions and do research to determine whether a different mortgage would better suit you and your family.
Maybe you want to pay down your mortgage faster. Ask yourself: “Do my finances allow me to increase the amount of my mortgage payments? Do I have savings set aside that I could use to make a lump-sum payment and decrease what I owe?”
Maybe you want to lower your payments to keep more cash on hand to cover childcare costs and save for education. Ask yourself: “Can I live with extending the loan for a longer period?”
Contact your current lender, other financial institutions and mortgage brokers to determine what mortgage terms and conditions they offer. Compare the different products.
“Competition among lenders affects how much they will charge to finance your mortgage,” says Lucie Tedesco, commissioner of the Financial Consumer Agency of Canada. “To find the best mortgage for your financial situation, check out the rates and terms offered by several lenders, and understand the costs involved in updating your mortgage.”
Stay put or move on
In the end, your current lender may offer the best deal, making your decision easy.
If you do want to switch to a new lender, consider the potential additional costs such as set-up fees or an appraisal fee to confirm the value of your property.
Find out whether a new lender will cover some of these costs. Be sure to get all the information you need to make the best decision for your financial situation.
More information is available at itpaystoknow.gc.ca.