A few years have gone by since you purchased your home (and your mortgage loan). Chances are, things have changed. The family might have gotten larger. Maybe you changed jobs. And so on.
Before you tie yourself to another contract, take time to assess where you stand.
Renewing your mortgage is the perfect opportunity to improve your situation.
Rate: Go Variable or Fixed?
If you were a first-time buyer, you probably chose a fixed rate. Most first-time homeowners prefer the stability and comfort of a fixed-rate mortgage.
However, now that you know more about the world of mortgages, you might want to consider opting for a variable rate. In a low-rate environment, you’ll get a lower rate and pay off your mortgage faster.
On the other hand, if you expect rates to go up in the near future, you might want to secure a fixed rate right away.
Not sure which is right for you? Talk to a Nesto.ca mortgage expert today to find the right fit.
Changing the Frequency of Your Payments
The simple act of changing the frequency of your payments may help you save a lot of money on interest. Yep, just by paying every 2 weeks instead of once per month.
Is paying off your mortgage faster one of your goals? If so, choose an accelerated mode of payment. You’ll make 26 payments a year (52 weeks/2), instead of 24 (12 months/2). These 2 additional payments get you 1 month closer to being mortgage-free.
Or, if your situation has changed and you would feel more comfortable going back to monthly payments, this is the perfect time to do so.
Most mortgage loans offer you limited prepayment options, often up to 10% of the initial amount of your loan, payable once per year. So, if you would like to make a large, lump-sum payment on your mortgage, there’s no better time to do it.
Change the Amortization Period
If you want to shorten or lengthen the amortization period of your loan, you can do so when renewing your mortgage.
Yes, a shorter the amortization period means you’ll be paying more every week or month. But you’ve got a good chance of getting a better interest rate, and you’ll definitely be paying off your mortgage much faster.
Finally, if you’re thinking of making renovations to your current home, or you’re considering a move to a bigger, more expensive home, you could refinance your property. Using the equity built into your home is a great way to get the money you need at a fair interest rate, since the loan is guaranteed by the assessed market value of your home.