Reviewing your mortgage regularly is sort of like getting your teeth cleaned.
Bare with us on the analogy here but consider the difference between attending all of your regular check-ups and cleanings and only going to the dentist when something hurts. The latter usually leaves you with an unexpected bill and a nagging ache in your head. The former, other hand, can help prevent a world of hurt.
It’s the same with your mortgage! You might not think about reviewing its terms until you have to, but getting in the habit of checking in regular can end up saving you thousands. Here are some core reasons why we recommend regular mortgage reviews, and why now is as good a time as ever.
Getting ahead of your renewal.
If you are like most Canadian homeowners, then you probably haven’t much considered your mortgage since your most recent term began. Especially if you are one of the lucky ones enjoying an ultra-low fixed rate term, then you are almost certainly kicked back, enjoying your consistent payment amidst the relative chaos. But this also likely means that you’ve crossed the halfway mark of your term and that renewal offer will show up from your current lender before you know it.
But not only do you not have to wait to receive that offer before connecting with a mortgage advisor, you actually shouldn’t wait. There are very few situations in which the lender’s renewal offer is going to be your most affordable option. In most cases, they will simply send you an offer with their best posted rate that week (which could be as late as 21 days before maturity) and call it a day. By signing that offer blindly, you are robbing yourself the opportunity to review so many more options that could ultimately save you thousands.
Why should that matter to you right now? Because although the rate environment is high (thanks a lot, Bank of Canada), 5 year fixed rates are actually decreasing. As the market has become more uncertain, investors have been opting for low risk investments - namely the 5 Year Government Bond. And, as the demand for bonds increases, the yield decreases, bringing rates down with it.
If you have a renewal coming up in a year or two, there is no certain way to tell what rates will be by then. But, if you take this opportunity to lock yourself in while we are in the midst of this dip, you could potentially buy yourself another 5 years of consistency!
Access your equity before you need it
Typically in times of economic uncertainty we see an uptick in the number of homeowners accessing the equity in their homes - either to create a safety net for a rainy day, to cover expenses in times of economic hardship, or to invest in a new project or business. But here is the thing about that - most lenders aren’t keen to lend you an umbrella on a rainy day. They’d much rather lend when things are still looking sunny!
This is why, now that the overnight rate has conditionally paused at 4.5%, this winter could be a perfect time to access that valuable equity. Of course borrowing against the value of your home is still debt and should be treated wisely, but creating that cushion by loosening up that cash while things are good could prevent so much stress down the road.
Payment check-in
If you opted for a variable rate for your current mortgage term, than you have no doubt already checked in with your mortgage advisor to create a plan for keeping your payment affordable. But even if you are in a fixed rate term that won’t end for another year or two, it is always wise to check in - clean teeth mean less pain in the end, remember?
With the huge selection of mortgage products available right now and the relative calm in the rate environment, you might be surprised to see that a restructuring mid-term will end up saving your family money month-to-month. And with the cost of simply existing in Canada reaching record heights with no sign of slowing down, we could all stand to free up some cash.
The bottom line
There is no doubt that the financial burden facing many of us right now is nothing to brush off. There is no worse feeling than not knowing how much longer we will be able to make ends meet. But remember that as mortgage professionals, we can do more than just help you buy a house. We can help you set yourself up to weather the storm, help you put down some roots to grow, and help you keep those proverbial teeth clean to avoid a headache in the future.
Reach out to our team any time to set up a no-stress mortgage check-up! We don’t have loot bags of toothpaste and floss to offer, but can send you off with a whole bunch of advice and inspiration for your financial future!
