It’s the time that makes most homeowners cringe — your mortgage is up for renewal and you’re not sure if you should renew with your financial institution or move. Before you make your decision, here are a few things for you to consider.
Use this checklist to see if you need to shop around:
1. What is your current interest rate? Is this more than the interest rates being advertised right now? If yes, you may get a lower rate by moving your mortgage.
2. What kind of mortgage do you have? Is it a variable or fixed rate? Is it open or closed? Scroll down below for more information on variable and fixed rates, open and closed mortgages. If your employment status has changed or if you have moved jobs, you may need to look at how to better structure your mortgage to fit your needs.
3. What is the length of time you want to pay off your mortgage, also called the amortization period? If your income has increased, you may be able to pay a little more towards your mortgage. You can then bring down the total number of years left on your mortgage and save on interest costs.
4. How often are you paying your mortgage payment? Can you make them more often, like from monthly to bi-weekly? If yes, this will help you pay off your mortgage faster and decrease the amount of interest you pay.
5. Do you have some extra money that you can use to make a lump-sum payment? If yes, doing a lump-sum payment during your renewal will help decrease your loan amount and the amortization period of your mortgage. You will then be able to select a more favourable term on renewal.
6. Do you have any debt or other expenses that you want to combine with your mortgage payments? For example a credit card debt or home renovations. This will increase the amount you owe on your mortgage or the number of years left on your mortgage. But it may help you get rid of the high-interest charges you’re paying and save you money. You’ll have to qualify to refinance your mortgage if you’re taking this route.
7. Do you want to consider adding on insurance? Mortgage insurance often includes life insurance, critical illness insurance, disability insurance or loss of employment insurance. This additional coverage will help protect you in case of any unforeseen circumstances.
8. Are you happy with the service your financial institution is providing you? Are they attentive to your needs and work to come up with solutions that are best for you?
Review your current situation
It’s been a while since you last renewed. The first thing you should do is review your current situation as things have changed, including the state of the housing market. You should do this with an expert who can provide you with the best advice, like an Alterna Banking Advisor.
At Alterna, we’re up for looking at lower rates and making the new terms of the mortgage suit your needs. After all, it’s not about us; it’s about what works best for you. We want to give you the freedom to think about other things in your life. Like where you want to go on your next vacation or whether you can afford that cottage on that premium lakeside spot! Our banking advisor will review everything to provide you with open and transparent pricing. So, you'll always know what you're getting. They can even talk to you about some of our innovative products such as –
Multi-ownership Mortgage – you can buy a home with your parents, siblings or even your BFF.
Flexi-Mortgage – this is like a “ladder” where renewal dates are staggered. This gives you the security of a closed mortgage and the flexibility of an open one.
Your mortgage is likely your biggest expense. So make sure you talk to an Alterna Banking Advisor about getting your best interest rate and savings! With terms and conditions that best suit your needs. The key is to talk to us a few months before your mortgage is up for renewal.
Get a better rate and a better mortgage
Variable Rate Mortgages
On a variable rate mortgage, your interest rate fluctuates with the prime rate. So, a variable rate mortgage is ideal when interest rates are dropping. If interest rates go up so will your costs of borrowing. The good news is, Alterna's variable rate closed mortgages have conversion options available.
With a fixed-rate mortgage, you are locked into a rate of interest for the term of your mortgage. This ensures you get the advantage of predictable payments.
Open mortgages allow you to prepay any amount of your mortgage at any time without a penalty.
Closed mortgages have a prepayment limit that ranges from 15%-20% of the original loan amount. Alterna mortgages have a prepayment limit of 20%. This means you can pay 20% of the original principal balance of the mortgage per calendar year. If you elect to pay more than 20% within a single calendar year, a penalty will apply. The advantage of a closed mortgage is that it usually offers a lower interest rate than, lowering your cost of borrowing.