Consider more than rates when renewing your mortgage


Matthew – Account Manager: So
it’s time to renew your mortgage!
Chances are, your circumstances have
changed since you started your last mortgage term. Renewal is a great
time to revisit your financial goals,
figure out how your mortgage payments
fit into your budget, and find a mortgage option that works
best for you. Don’t sign up for the same
type of mortgage that you had before
without a review of your circumstances and the options available
to you. The first thing to consider is
whether you prefer a fixed rate or
variable rate term. As you may know, a fixed rate provides
you with the security of knowing what
your interest rate will be for the term
of your mortgage for example 5 years. A variable rate
term will fluctuate with the prime rate,
but offers a greater chance of saving on
interest costs over time. Understanding your comfort
level with fluctuating rates will help
you determine what’s best for you.
Another point to consider is your amortization – or length of time
it will take you to pay off your
mortgage. If you have taken on
additional expenses you may wish to decrease the amount of
your monthly payment. This can be done
by increasing your amortization.
However, be aware that this will increase your overall costs
because your mortgage will take longer
to payoff. If your cashflow has
improved since your last mortgage term, you may want shorten your
amortization. This creates a higher
monthly payment, but reduces your
overall interest costs because you pay off your mortgage
faster. If the interest rate for your
new term is lower than your previous
rate, by keeping your regular payments the same, you will
reduce your amortization, without having
an impact on your budget. Too many
Canadians just look at the rate when the real secret to
saving money at renewal time is to
explore term, amortization, payment
frequency and even pre-payment options. Revisiting
your financial picture and your future
goals makes sense at renewal. By doing
so you will be able to make any necessary adjustments to your
mortgage to allow you to live
comfortably today while preparing for
your future.

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