Mortgages are one of the largest financial commitments most of us will make in our lifetimes, so it is vital to fully comprehend how renewal works before accepting your lender’s offer.
With rising interest rates projected throughout 2022, mortgage borrowers will likely face increased payments and debt service ratios when renewing their loans. A mortgage broker can assist you in finding a solution tailored specifically to your financial circumstances.
Ok so, How to renew your mortgage in 2023?
- Know what you’re signing on for
Current mortgage interest rates are at their highest in over 10 years, leading borrowers coming up for renewal to experience sticker shock and saving money will likely prove challenging. But there are ways you can ease this pain and save money at renewal time.
As part of the mortgage renewal process, it’s crucial that borrowers understand exactly what happens. At renewal time, their agreement with their lender comes to an end and they have two choices available to them; either renew with their current bank or switch lenders altogether.
Start shopping around for a mortgage renewal at least several months in advance to give yourself enough time to find competitive loan offers that meet your needs and collaborate with a mortgage broker who can find you the most appropriate financial solution. Their insight into various lender offerings are also invaluable – creating strategies to align your loan with long-term goals while maintaining financial peace of mind.
- Consider a shorter term
Given today’s record-high mortgage rates, homeowners should carefully evaluate their options and consult their mortgage broker to secure the best possible loan terms. A few simple steps could save thousands in interest over the life of their loan.
Since the Federal Reserve raised their benchmark interest rate to combat inflation in March 2022, mortgage interest rates have seen significant increases. Bond market fluctuations also caused mortgage rate changes as bond holders sold off securities to cover debt obligations that came due.
Many experts project that mortgage rates will continue to climb until late 2023 or early 2024 before beginning their downward trend again. Therefore, if your loan comes due for renewal between these dates it might be wise to opt for a shorter-term fixed rate option like three year fixed so as to be protected against rising rates and take advantage of any subsequent dip once it occurs – saving thousands in interest charges along the way!
- Talk to your mortgage broker
Mortgage brokers can be invaluable resources for renewing your loan at renewal time and can provide invaluable insight into all the products offered from various lenders. Hiring one may even save money by helping to ensure that your mortgage fits with your financial goals more closely.
As part of your mortgage renewal process, you have the option of increasing the amortization period (the total length of time it will take you to repay your entire mortgage in full) in order to reduce monthly payments by increasing it – however this requires refinancing and may incur prepayment penalties.
As a buyer’s market currently exists within the mortgage industry, buyers have more access to properties and can negotiate favorable terms when renewing their mortgage in 2023. Therefore, it’s essential that when renewing your mortgage this year you carefully consider your options – doing so could save thousands! Take note of mortgage rates as well as total costs before making a commitment and contact with a qualified mortgage broker early for better odds at finding an optimal loan package.
Mortgage renewal can provide an important opportunity to reevaluate and save on expenses, yet without proper care it can be easy to overlook key details in a lender’s renewal offer and miss out on an improved deal.
As a general guideline, lenders typically send mortgage renewal letters 120 days prior to term expiry – this provides ample time for you to begin exploring all available mortgage options or at least begin considering them.
Your current lender might offer you terms for renewing your mortgage without shopping around first – and this could save you thousands in interest costs! As an experienced Certified Financial Planner and Canadian Mortgage Broker with 16+ years’ experience, I’ve helped numerous clients negotiate lower renewal rates and save thousands through negotiation; even just a small difference in rate can have dramatic effects on monthly payments.