The new stress testing rules, rising interest rates and the increase in mortgage renewals can make refinancing your mortgage more expensive and complicated. It is always important to consider your options when renewing your mortgage. A small saving in interest rates could save you thousands of dollars in the long-run.
Typically, around 25 to 35 per cent mortgages need to be refinanced each year. This year, 47 per cent will need refinancing. This increase in renewals comes as mortgage rates have started to rise. Canada’s large banks have raised their rates and their special offer rates are also higher compared to last summer. Five-year fixed mortgage rates are over three per cent compared to 2.5 per cent a year ago. If you are renewing your mortgage at a higher rate than you are currently paying, your mortgage payment will rise if your amortization period remains intact.
Homeowners with uninsured mortgages who stretched their finances in to buy their homes will be facing additional challenges. Because of the new rules, if the homeowners seek to change their lender when they renew their mortgage, they may have to face the new stress test. Some borrowers may not be able to move their mortgage to a different bank which leaves them with less power to negotiate with their current lender.
It is important to talk with your mortgage broker to get an updated look at your income and expenses to see how they may have changed since you first obtained your mortgage. Homeowners should start looking into this six months before the actual renewal date. Starting early may allow you to lock in a rate before they rise again.
Andy Vickers
The Mortgage Group