When your mortgage term comes to an end, the next step is to look at your mortgage renewal options. Here are five things you should consider when renewing your mortgage to make sure you pay the least amount of money over your next term.
Do not simply sign renewal papers with your current lender!
When your renewal papers come in the mail, please understand that your current lender hasn't offered you the best terms available. Don't just sign and mail them back, to get the best deal… you need to look at all your options first!
Most Canadians are conditioned to think that the lowest interest rate means the best mortgage product. Although sometimes that is true, a mortgage is indeed more than just an interest rate. You can save yourself a lot of money if you pay attention to the fine print, not only the rate.
Fixed vs Variable
Whether you go fixed or variable is a big decision. You must decide whether the rate will be allowed to fluctuate along with the bank's prime lending rate or whether you want to lock in the rate for the whole term.
Also, consider the term length for each fixed and variable, you have lots of options! 6 months to 10 years.
Breaking your mortgage
If you decide to break your mortgage early, you will inevitably end up paying a penalty. A variable rate will typically cost three months interest to break, whereas breaking a fixed rate mortgage can be significantly more costly as you could incur an interest rate differential penalty.
When your mortgage is up for renewal, you are in a unique position to refinance your mortgage without incurring a penalty, so make sure you consider this option as well.
So if your mortgage is up for renewal within the next six months, looking at all your options is the best way to make sure you get the best mortgage for you.