It used to be that Canadians looked forward to mortgage renewal time because it meant that they could negotiate a lower rate with their financial institution. But considering that the Bank of Canada has raised interest rates five times over the last year and is likely to do so again in the near future, this is no longer the case. Furthermore, the new financial stress test makes it more difficult for mortgage holders to shop around. If they cannot pass the financial stress test, they won’t be able to move to another federally regulated lender and this limits their ability to negotiate with their current lender.
So what should Canadians do when (and before!) they receive their mortgage renewal notice from their bank? Here area few tips:
- Talk to a mortgage broker. Before you sign a renewal offer from your current lender, be sure to sit down with your mortgage broker. They will have a good sense of whether you are being given a good offer or whether you should try for something better.
- Choose a lender you feel comfortable with. As mentioned, if you cannot pass the financial stress test, you will have less options when choosing a lender. Be sure to choose one that you can feel comfortable with long term.
- Take care of your credit. The better your credit is, the more options you will have at mortgage renewal time. Keep your debt under control and be sure to make your payments on time. This will help to make sure you have a good credit score and increase the likelihood that you can pass the financial stress test.
- Don’t take out a loan. If you are considering buying a new vehicle or need a loan for any other reason, try and wait until after you have renewed your mortgage. Taking out a loan prior to your mortgage renewal impacts your debt service ratio and could make the difference between passing or failing the stress test.
- Pay off loans if you can. If you already have a loan but are close to paying it off, it will be worth the hustle to get it paid a month or two before your mortgage renewal. The less debt that you have, the less risky an investment you will be for a potential lender and the better rate you are likely to get.
If your mortgage will soon be up for renewal, why not sit down with one of our professional mortgage brokers and let them help you get the best rate and terms. Call us today for an appointment.
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