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Every year about 17% of Canadians renew their mortgage terms.
The most popular term for Mortgage Renewal has always been the 5 year term, and although many people are unaware of this, there are shorter terms and of course with a shorter term your renewal date comes around more frequently.
But many homes are also sold frequently every year and with that, those mortgages paid off and gone.
Right now, if it is time for your Mortgage Renewal, 100% your mortgage rate is going to go UP from your previous term.
5 year fixed rates are up between 23% and 39%.
Static payment variable rate mortgage are up over 26-37%.
The shorter term rates (1 and 2 years) are up a minimum of 25%
Now, if you have a mortgage with an Alternative Lender – right now, those rates have risen the most!
Alternative lenders are there for those with bruised or damaged credit and difficulty proving income the traditional way.
Alternative lender rates are up 100% – DOUBLE – 1 year 3.09% is now 1 year 6.39%.
This DOES NOT mean that your payment has doubled. Remember the payment is always a combination of Principal and Interest – and therefore the payment increases depend on remaining amortization or if the payments were set higher to pay down faster, so without knowing more details, we cant tell you exactly what the change will be.
So we have to make an assumption that payment increases equal to roughly half the rate increase percentage.
This is still quite a big jump.
What do you do for your Mortgage Renewals?
Here are some options for you:
- You can increase the amortization. This will bring payments down but its a full refinance process, a whole new mortgage application really, and new stress test, not everyone will qualify, and of course if you do qualify, there will be some fees
- Shop around – and seek advice from a mortgage broker- they have the ability to look at many lenders at once and they can let you know all of your options, even from the lenders that your own bank is not promoting.
It’s more important than ever to seek to carefully review your options and terms and to seek out independent advice, be weary of those that have ties to specific lending institutions – your bank may have an alternative arm, but all it is is farming out to B or private lenders and collecting fees.
It’s been about 10 years when Mortgage Renewal time meant good news for most, as rates usually went down. NOT ANYMORE, at least for now.