The spring market is here, which means many buyers are gearing up to purchase a new home. At the same time, existing homeowners may find that their mortgage is soon up for renewal. Here are some key things to consider, whether you’re entering the market as a new buyer or navigating the renewal process.

IF YOUR MORTGAGE IS UP FOR RENEWAL

1. Shopping around different lenders can save you money
We’re always eager to get a second opinion when it comes to our cars or an airline ticket, and it’s even more important to do the same for our mortgages. More than 50 per cent of borrowers don’t consider shopping around for a mortgage when it comes time to renew. As a homeowner, it’s important to know that you’re not obligated to renew your mortgage with your current lender, and better options are available. By shopping around at renewal, you have an opportunity to save money not only with a lower rate, but with better mortgage features.

2. Consider prepayment privileges and penalties to save you money
By the time your mortgage is up for renewal, your financial situation and goals have likely changed since when you first bought your home. If you’re now in a position where you are able to pay down your mortgage faster because your income increased, or you’ve received a monetary gift from a family member, you’ll want a mortgage that allows you to do this without penalties. If your goal is to be mortgage-free, you’ll definitely want to read the fine print and consider the prepayment privileges and penalties associated with your mortgage – as this can save you thousands of dollars down the line.

3. Pay off or consolidate debt and refinance before renewal
If you have a loan that you’re planning to pay off, it’s best to get that finalized before you renew your mortgage. If you find yourself in need of a loan, it’s wise to hold off applying until after your mortgage renews. Having outstanding debt or applying for a new loan could potentially make or break your chances of passing the mortgage stress test. Renewal time is a good occasion to determine if it makes sense to refinance your mortgage and potentially leverage your home equity to pay off your debts at a much lower rate.

IF YOU PLAN TO BUY A NEW HOME BUT YOUR MORTGAGE IS NOT UP FOR RENEWAL

1. Determine your affordability by getting pre-approved
Before you begin your home search, you will want to get clear on how much you can afford. A mortgage pre-approval is an excellent way to understand your home affordability, and can save a lot of time and stress throughout the buying process. It will help you set a clear budget and simplify your home search so that you’re not looking at homes outside of your price range. Although pre-approval is not mandatory, it offers buyers a handful of advantages that ensure a positive buying experience.

2. Search for mortgage options outside of your bank
A common mistake many Canadian homebuyers make is that they will often go directly to their bank for a mortgage, without taking the time to explore other options. Believe it or not, Canadians are able to secure a mortgage outside of the big banks through other lenders such as credit unions or monoline lenders. These lenders offer strong mortgage products that may be more suitable to your needs and financial situation. Since mortgage products, features and terms vary from one lender to the next, shopping around is essential and will ensure that you lock in a mortgage that you’re completely confident in.

3. CMHC insurance is required for down payments less than 20 per cent
In Canada, the minimum down payment is from five to 20 per cent. If you’re a first-time buyer with a down payment in that range, you’ll be offered what is called a “high-ratio insured mortgage.” This type of mortgage requires you to pay CMHC insurance, which allows you to borrow up to 95 per cent of the purchase price of a home while protecting the lender in case your mortgage defaults. The cost of this insurance typically ranges between 2.8 and 4.0 per cent of your overall mortgage amount.