Close To Your Mortgage Renewal? Make a Call To Save $10,000 Or More

There’s another (likely “only”) half a percent rate increase coming at the next Bank of Canada meeting in September. While inflation seems to have peaked, but that’s just an educated guess, our rate increases may not be over until the end of the year.

If you have a mortgage coming due for renewal like I do, it’s not a pleasant thought. However, if your mortgage comes up in the next six months, a number of lenders WILL let you renew if you’re within that six months! That’s what I did last week. My rate is going up 2.4 percent, but that’s better than three percent after the September increase, and any other jump after that. Check with your lender today if your mortgage is up in February next year or earlier! That call may end up saving you over ten thousand dollars!

What’s the rate increase going to cost you? That depends on the rate you currently have. However, a 3% increase on each $100,000 will be $3,000 a year. So someone with a $400,000 mortgage will see their payments go up close to $1,000 a month! What do you get for that? Nothing! It’s a huge increase in your monthly spending for just getting to stay in your home. Yes, it stinks and it’s depressing, but that’s what rising rates cause. Your early renewal will start the following month, so be ready to change your payment budget!

How long should you renew for? That’s up to you. I only ever answer questions as to what I would do – or in this case, what I did. My thinking was that rates will peak sometime next year at the latest. But then it’ll take a while for them to ease downward. Like gas prices, they spike up and take forever to come back down. Even when the Bank of Canada decreases rates, that doesn’t mean the chartered banks will immediately pass that prime rate decrease on. So it didn’t make sense to me to just do a two-year mortgage for that reason. But I sure wasn’t going to sign for five years at these rates as selling or refinancing triggers a big penalty (typically three months or the interest differential – whichever is larger.)

So I picked the kind-of middle option of a three-year term at 5.2%.

While my mortgage is pretty small, I sympathize with anyone who is close to the $400,000 mortgage example about to flush $36,000 of net income down the toilet over the next three years…

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