Vancouver Mortgage Renewal Strategies – Consult Bruce Coleman, Vancouver Mortgage Broker
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Vancouver Mortgage Renewal Strategies
Over the years, homeowners in Vancouver who renewed their mortgages became spoiled by low interest rates which never seemed to budge upwards.
Times are “a changing” because mortgage interest rates are on the rise. As your mortgage term expires and you go to renew over the next few months or sometime over the following year, you might find that you could end up having to tighten the financial belt to account for rising interest rates.
Most homeowners who go to renew will only be slightly financially inconvenienced but others who have a more restrictive budget could find themselves more challenged to make ends meet.
Variable rates have risen up to around 2.6 % even with a good discount while a similarly discounted 5 year fixed rate has risen to just under 3.50 % which is a 0.6 % increase from just a few months ago.
If your mortgage is coming up for renewal then it might be time for you to become more proactive about making some money saving decisions well before it’s time to renew.
Although most homeowners will be able to financially manage any future increases in the mortgage rates, these rate increases may affect your cash flow for sundry pleasures such as eating out on a regular basis.
Strategies to Deal with Mortgage Renewal
The main strategy that you can use is to end your mortgage several months before it expires and obtain refinancing at current rates so you can avoid higher interest rate costs down the road.
Renew you Mortgage Early
Many lenders will allow you to renew your mortgage earlier and before its actual expiry date such as within a 90 day period so you can obtain a new 5 year term at current rates and avoid future increases.
Blend and Extend your Mortgage
Another option is that you can also do what is referred to as “blend and extend.” This means that you covert what remains on the existing balance of your current fixed rate mortgage and convert into a new loan but with a blended interest rate.
What about Penalties?
Yes, you are correct in assuming that a penalty will be involved. However, if you time the renewal properly, you can still save plenty of cash with your savings on the interest rates over five years even if you have to pay a penalty for the 2 or so months on your existing term. The savings can still be quite substantial. The key to performing this manoeuvre to your advantage is timing.
And, if you decide to perform this tactic and take your mortgage to another lender then don’t forget that you will also have to incur additional legal fees as well. However, some experts suggest that if your existing mortgage amount falls within a certain range then even the extra cost of legal fees may well be worth the expense.
Whatever you decide to do, if your mortgage is coming up for renewal in the next 6 months then now is the time to start getting advice to know and understand your options because it can save you plenty of cash if you time it right and take action at the appropriate time.