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Mortgage Tips for Smart Renewal Decisions in 2023

Renewing a mortgage might seem like a routine financial step, but in the ever-changing landscape of interest rates, homeowners in Canada need to be more proactive than ever. With about 66% of homeowners needing to renew their mortgages at least once before paying them off completely, it’s crucial to understand the nuances of mortgage renewal and make informed decisions. Here are some essential tips to navigate the mortgage renewal process effectively, especially in the year 2023.

1. Assess Your Financial Goals

Before diving into the mortgage renewal process, take a moment to reflect on your financial goals. Does your current mortgage align with your objectives? Are you planning to stay in your home for the long haul, or might a change be on the horizon? These questions will shape your decisions moving forward. Given the recent upward trend in interest rates due to the Bank of Canada’s key Overnight Lending Rate hikes, you might find that a different mortgage product suits your circumstances better.

2. Start Shopping Early

While lenders typically provide renewal offers within the last month of your mortgage term, you don’t have to wait until then to start the process. In fact, you can begin negotiations as early as 120 days before your current mortgage matures. This early start allows ample time to explore options, seek advice from mortgage brokers, and identify the most favorable products. Considering the potential rate hikes, it’s a wise move to give yourself the gift of time.

3. Don’t Settle for the Status Quo

When that renewal slip lands in your mailbox, it might seem convenient to go with the flow and accept the offered rate. However, remember that these slips often offer only modest discounts from posted rates. With interest rates on the rise, it’s in your best interest to explore alternatives. Don’t hesitate to ask for better mortgage rates and consider looking into different lenders. This becomes even more crucial when interest rates are trending upward.

4. Secure a Rate Hold

In the midst of evaluating your options, interest rates could continue to rise. To protect yourself from unexpected rate increases, consider securing a rate hold. Mortgage brokers can often facilitate this, ensuring that the rate you’re quoted remains stable while you make your decisions. This can be a valuable shield against market volatility.

5. Mitigating the Interest Rate Risk

The concept of ‘interest rate risk’ comes into play, particularly when there’s an expectation of renewing a mortgage at a higher rate. This risk is more significant for those with variable-rate mortgages, fixed-rate mortgages up for renewal, or home equity lines of credit with variable interest rates. A proactive approach, involving diligent rate shopping and informed decision-making, can help mitigate this risk and protect your financial stability.

In summation, the mortgage renewal landscape in 2023 demands a proactive stance from homeowners. With interest rates on the rise, the time to act is now. Assess your financial goals, start shopping early, and don’t settle for the first offer that comes your way. By securing a rate hold and actively exploring your options, you can navigate the mortgage renewal process with confidence. Remember, it’s your financial well-being at stake, and a little effort today can yield significant savings tomorrow.

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