Believe it or not, there are so many other Canadians with the same mortgage questions/concerns/problems as you! Your mortgage situation may be new to you, but as mortgage specialists, we’ve seen it all and can use our expertise to guide you in the right direction. Let us break down some of the most common mortgage scenarios:
Scenario 1: Your mortgage is up for renewal this year
I guarantee that your first thought was “I’ll just commit to another 5-year fixed term because they have the lowest rates”. Well.. DON’T do that. At least without reviewing your current mortgage situation and exploring other products that may
benefit you more. A lot can change throughout your term with your personal finances and the mortgage market. Think of it this way, rates are likely to drop in the next few years and you don’t want to be stuck with a fixed rate at 7% and watch the rates go down by 2% in 2024… that would suck and you’d be unhappy.
Consider a 3-year fixed rate term. It can be a happy medium - you can get a reasonable rate, avoid another possible increase, and take adva
ntage of lower rates when you renew.
Scenario 2: You’re in a variable rate with another 2-3 years left in your term
You can definitely see some benefits with a variable rate in the right market. A reason most people opt for fixed rates is that they see it as a small cost to pay for a guaranteed payment structure throughout the term.
In this scenario, you have two choices. One is to think about the option in scenario #1, lock into a 3-year fixed rate term. This is good if you prefer stability and certainty. You’ll know your mortgage payments every month, and you won’t worry about changes.
The other option is to stick with your variable rate and hope for the best. This is risky, but it could pay off. Rates have gone up a lot, but they’re likely to come down. Some things to consider in this decision is: what does my monthly budget look like? Do I have room to comfortably shift with monthly payment variances? Will the uncertainty stress me out? If you can handle fluctuations and uncertainty, you might save more money than if you were locked in but there is nothing wrong with craving certainty in a fixed rate.
Scenario 3: I need to consolidate my debts and I need a lower payment
If you have non-mortgage debt, such as credit cards, car loans, or student loans, you’re paying a lot of interest and fees every month. This can make it hard to manage your cash flow and save for your goals. A smart way to deal with this problem is to refinance or consolidate your debts.
Some lenders will let you break or add to your mortgage, so you can use your home equity to pay off your other debts. This way, you’ll have one monthly payment at a lower interest rate. You can also extend your amortization period to lower your payments more. Of course, this means more interest over time, but you can shorten your amortization later when rates go down or your income goes up.
It can be stressful to make decisions on what to do with your mortgage… It’s a lot of money and generally something you only have to think about once every few years. Luckily, we’re here to guide you towards a mortgage product that fits your needs and will help you achieve your financial goals. Give us a shout and let us ease some of your stress!