Preparing for a mortgage renewal in a high interest rate environment

By next year, an estimated 1.2 million mortgages will be up for renewal in Canada. Understandably, many homeowners are concerned, given the current state of the economy. The rising interest rate environment of the last three years, combined with the increase in cost of living, has made many Canadians cautious for valid reasons. For those approaching the end of their mortgage term, or applying for their first mortgage, here are some key tips to consider in this situation.

1. Don’t simply accept your bank’s renewal letter

Approximately four to six months before your renewal, you will receive a letter from your bank. Though renewing with your bank might seem like a convenient option, it’s important to remember that banks are not incentivized to offer you their best rate. Accepting this proposal might mean missing out on a better option in the marketplace.

2. There’s power in shopping around different lenders

In a high interest rate environment, rates and features can vary quite substantially from one lender to the next. Shopping around, as in with any large financial decision, gives you a clear picture of what’s available in the market from other banks and lenders. It also provides you the time to understand and weigh the different options before you make a final decision.

3. Find an unbiased mortgage advisor

This doesn’t necessarily mean going from one bank to the next. Finding an unbiased mortgage advisor, such as our team at Homewise, can shop around for you with multiple banks and lenders, while providing tailored advice, including whether a fixed- or variable-rate is suitable for you based on your goals. Not to mention, a company such as ours also has an integrated real estate team can take things a step further, giving you meaningful insights into your home’s worth and other concerns you may have – all at the same time. This is a major financial decision, and it is so important to make sure you are getting the best advice.

4. Explore alternative mortgage options

When it comes time for renewal, most homeowners want to keep their home and refrain from selling due to economic conditions. Consulting an unbiased mortgage professional expands your horizons, helping you find your best rate for highly qualified borrowers, but also offers a diverse range of options for individuals with lower credit ratings and/or higher levels of debt that may not be accessible with prime A lenders. If mainstream options seem out of reach, remember that alternative and customized options are always available and, while they come with a slightly higher rate, may be the right option for many Canadians renewing in 2024 and 2025.

If your looming renewal feels daunting, don’t worry. Shopping around different lenders and finding an unbiased mortgage professional will empower you to navigate this journey with confidence and make the best decision that is aligned with your goals. Doing your due diligence and consulting with experts is always worth the extra effort when it comes to your financial future as it can save you thousands of dollars and a lot of headache.