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Mortgage Renewal Tips To Breeze Through For 2023
With Bank of Canada announcing interest rates to be 4.5% the mortgage rates are likely to be around 6.9% for a traditional mortgage of five years. As economic uncertainty looms in the air and interest rates touch the sky, here are some tips to breeze through a new mortgage contract. Term extension: It is likely that with the recent economic events, you have been finding it hard to make your mortgage payments. In fact, it was found that 28.75% of mortgage borrowers spent 25% or more of their income on the mortgage. If you find the going rough, experts suggest refinancing your mortgage for a new one with reconsidered terms and a different rate too. So if your new contract has a longer amortization period your payments towards the mortgage are likely to reduce and remove some burden off you. The flipside is an increased interest overall, but it will help lighten the situation too. Be flexible to avoid the fee: If your current home is not your dream home then you need to think through it before you renew your mortgage. If you plan to sell the house a few years from now, you should have the option to transfer the terms of the current mortgage to your new home. The thing to be kept in mind is the prepayment penalties in case you decide to sell the home before the term ends. In order to make a decision read your current mortgage terms to see if it can be transferred, and try to get the best renewal rate while looking around. Another thing to be kept in mind is that you need to qualify afresh for the new mortgage. You will have to prove to the lender that you can pay the mortgage you are taking up. Go for a fixed-rate mortgage: The advantage of having a fixed-rate mortgage is that it is more predictable in terms of the payments that need to be made and the interest rate at which they need to be paid. The rate doesn't change often unlike variable-rate mortgages. Experts too suggest short-term fixed-rate mortgages are better than their variable counterparts. But those renewing their mortgages should think through if they want to lock the mortgage at all and if so, then for what period of time? You could even try to offset higher rates by either increasing current payments so you can pay the balance mortgage faster or by making a lump sum payment if that is possible. Paying debt faster with variable-rate mortgages: When you are about to renew your variable-rate mortgage, you need to think if any changes in rates will reflect on your lifestyle and if you have tried to make larger payments to pay up the mortgage faster. This is because though variable-rate mortgages have usually had low-interest rates in the past, given the current economic volatility, this is no longer the case. Remember that if you have three or fewer years remaining in your existing term you can always change to a fixed-rate mortgage. You already know when your term is ending, so don't waste time and start shopping for better terms already. If you have any questions or doubts about mortgage renewal, write to us at LendX Financial in Brampton, Greater Toronto Area.