The Canadian Mortgage and Housing Corporation (CMHC) predicts about 2.2 million Canadians will have their mortgages up for renewal in 2024 and 2025. That works out to about $15 billion in borrowing. Five years ago, mortgage rates were extremely low, so homeowners were able to borrow more and keep their payments reasonable. With those same mortgages now up for renewal, many Canadians are facing some tough financial realities.
Fortunately, there are professionals who can help you to navigate through these tricky times. Rochelle Edwards, The Genuine Realtor here in Burlington and Eric Sabatini of The Mortgage Group both specialize in helping families find homes and mortgages that are right for everyone’s unique needs.
Fixed vs. Variable Rates
Did you know that about 2/3 of Canadians choose a fixed rate mortgage? That means their monthly payments do not fluctuate along with interest rates. Right now, when a 5-year fixed rate mortgage renews, the homeowner may experience as much as a 35% increase in their monthly payments.
On the other hand, those who have variable rate mortgages have had to adjust to their increasing monthly mortgage payments since 2022.
“If you have a variable rate mortgage, you have been feeling the pressure for the last two years. You’ve likely been adjusting your spending or using your savings to help cover the fluctuating costs of your mortgage payment,” says Rochelle.
Variable Rate Mortgage Options
A common question for those who have variable rate mortgages is whether or not to stick it out. Should you weather the storm of increasing interest rates or lock in now? According to Eric, there are a few options when it comes to a variable rate mortgage.
“First of all, can you afford to wait it out? How dire are things for you? Can you hold onto your variable rate for a little longer just to see if rates begin to decrease in the near future?” asks Eric.
If you don’t want to wait it out, Eric explains that there are a few options:
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Lock Into a Fixed Rate
With a fixed rate, you won’t be able to take advantage of any rate drops that are expected, but you will most likely be offered a lower interest rate than you currently have.
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Change Payment Frequency
Switching from a monthly payment to a regularly bi-weekly payment can make it easier to budget, depending on the frequency of your pay cheque.
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Break the Mortgage
If you break the mortgage before the term is up and refinance, it may be worth it even after the penalty.
Fixed Rate Mortgage Options
If your fixed rate mortgage is up for renewal, it pays to be prepared. Eric shares a few essential ways that you can make sure to get the best mortgage product for your own unique circumstances.
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Start Early
About four months before your mortgage is due for renewal, start preparing. This is the time to lock in a fixed rate or variable rate promotion. Your mortgage professional will then have time to track rates and may potentially be able to get you a lower rate within that four month period.
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Know Your Current Financial Situation
Has your income changed? Do you have increased expenses? Are you planning for future investments? Do you want to consolidate debt? Do you want to keep your mortgage payments the same? These are all important questions to answer.
“It all needs to be assessed precisely so the mortgage fits your life appropriately,” advises Eric.
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Don’t Just Sign the Lender’s Letter
You can expect to get a mortgage renewal letter from your lender in the mail. Before you decide how to proceed, sit down with a professional like Eric to understand your options.
“Educating yourself on your options so you can make a stronger, more informed and knowledgeable decision about your greatest asset,” says Eric.
Sometimes Selling is the Best Option
For some people, the best course of action is to change circumstances all together.
“We understand that for some, deciding to sell is the best option for the long-term,” says Rochelle. “There are a lot of potential outcomes when you sell from finding something smaller or less costly to maintain to choosing to rent and focus on other investment strategies or bringing in a housemate to help make life more affordable. If renewing isn't an option for you, I'm happy to connect and help you process what the best strategy is for you.”
To learn more about how to supercharge your mortgage renewal in Ontario, give Rochelle at call at (905) 484-0747, email [email protected] or visit her online.
This article was sponsored by Rochelle Edwards - The Genuine Realtor - S. Todd Real Estate Ltd., a 2023 BurlingtonToday Reader Favourite.
