Mortgage Renewal Made Easy
May 21, 2014
As we at last shed our winter coats and embrace spring, it’s a good time to think about your home and, in particular, your mortgage. Pull it out of the drawer and dust it off. Renewals mark a good opportunity to re-evaluate your financial progress and can reveal ways to free up cash flow or ways to pay down a mortgage sooner. Whether renewing it at term or earlier, here are a few things to consider.
If you’re renewing your mortgage this year, like a majority of Canadians at the time, you probably purchased a five-year fixed mortgage back in 2009. Rates then were around 4% or 5%, give or take. Today, rates are lower. For instance, right now, Libro is offering a five-year fixed mortgage at 2.99%*. Rates like this mean you could be looking at lower monthly payments by as much as a few hundred dollars. Nice. Especially if you need to increase cash flow for school, kids or renovations. But, if you’re accustomed to your current payment level, you might opt to keep it the same and pay off your mortgage a little sooner. That’s nice too.
Refresh Your Financial Plans
A mortgage renewal is a good time to revisit your financial plan. Chances are things have changed a little or a lot since you signed on.
Maybe you’ve got a lingering line of credit or maybe it’s time for new windows or you’re finally ready to renovate your kitchen. By now, you’ve accumulated some equity in your home so you can use your mortgage to consolidate debts or borrow a little to put towards renovations.
Or maybe you’re earning more today than you were five years ago, changing your financial goals. You might now be in a position to take advantage of flexible payment options and pay twice a month, increase your monthly payment amounts or schedule an extra lump sum payment. Putting even a little more toward your mortgage can shave years off of it and save you money in interest.
Time to Sign?
So how do you go about renewing your mortgage?
- Start looking at renewal about six months before your mortgage is due. Give yourself time to look at all your options, and take the opportunity to discuss plans. Your Coach will follow up with you to discuss early or regular renewal, depending on your circumstances. You might talk about a 90-day early renewal option, which allows you to renew early, without penalties, yet lock in at today’s good rates.
- Variable or fixed? A big question with lots of considerations and no right or wrong answer. It comes down to what you’re comfortable with. Rates are good right now and a fixed-rate means you have a predicable mortgage payment for a set number of years. Variable can be appealing, as rates are low now, but you’ll need to consider your comfort level if rates go up and your payments increase.
- If you’re looking to sell your house to buy something else, mortgage discussions should focus on timelines and overall plans to be sure your term makes sense for you.
- Look at the details. It's not just about rate, though that's important -- it's also about amortization and payment strategies, getting the support you need to save money over the entire span of your mortgage, and profit-sharing. All the extra benefits add up.
Mortgage renewal can be pretty straightforward and easy with a little planning ahead. As with all financial transactions, eligibility is determined by a number of factors, including credit score, income and assets, and debt ratio.
Contact your Libro Coach for more information about your mortgage. Remember your Coach is the financial expert at Libro who is passionately accountable for your financial well-being. Whether it’s in person, by phone or by email, connect with your Coach today.
*Rate subject to change.
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