Mortgage renewals can be a stressful time for homeowners in Quebec, especially with the significant increase that many homeowners will see when they renew their mortgage. According to The Globe and Mail, homeowners in Toronto and Vancouver facing pending mortgage renewals could find themselves paying hundreds of dollars more a month. They will need to consider ways to prepare for the coming hit from proactively hiking payments now to paying down other forms of debt to minimize their exposure to rising interest rates.
So what does this mean for homeowners in Quebec? Rising interest rates are affecting mortgage renewals for homeowners across Canada, and this can lead to significant increases in mortgage payments. For example, if you have a mortgage balance of $394,170 (assuming you haven’t made any lump-sum payments), a 5-year fixed rate of 4.89% and a new monthly mortgage payment of $2,567, upon renewal, you’ll be paying an additional $445 per month (a 21% increase), or an additional $5,340 per year on your mortgage payments.
If you’re facing a significant increase in your mortgage rate, there are some potential solutions that you can consider:
Negotiating with your lender
One option is to negotiate with your lender. Your lender may be willing to offer you a lower rate, especially if you have a good credit score and a solid history of making your mortgage payments on time. It's important to start this process early, ideally at least six months before your mortgage renewal date.
Your lender may be willing to offer you a lower rate, it is important to negotiate.
Refinancing your mortgage
Another option is to refinance your mortgage. This means taking out a new mortgage at a lower interest rate and using the proceeds to pay off your existing mortgage. Refinancing can lower your monthly mortgage payments and save you money over the long term. However, it's important to weigh the costs of refinancing against the potential savings.
Refinance your mortgage to use the equity of your home.
Exploring alternative mortgage options
Finally, you could explore alternative mortgage options. For example, you could consider switching to a variable rate mortgage or a shorter term mortgage, both of which may have lower interest rates. Again, it's important to weigh the costs and benefits of any alternative mortgage option.
Consider your options and assess their future impact.
To navigate this process effectively, here are some practical tips for homeowners:
Start preparing early for your mortgage renewal
Don't wait until the last minute to start thinking about your mortgage renewal. Start preparing at least six months in advance to give yourself plenty of time to explore your options and negotiate with your lender if necessary.
Start planning 6-8 months in advance.
Consider paying down other forms of debt to minimize your exposure to rising interest rates
If you have other forms of debt, such as credit card debt or car loans, consider paying them down before your mortgage renewal. This will help minimize your exposure to rising interest rates and reduce your overall debt load.
Banks are more likely to favour you when your debt is low.
Proactively hike payments now
If you're able to do so, consider proactively hiking your mortgage payments now. This will help you get used to the higher payment amount and reduce the impact of the rate increase when your mortgage comes up for renewal.
Increase earlier to save later.
In conclusion, homeowners in Quebec should be aware of the upcoming mortgage renewals and the significant increase that many homeowners will see when they renew their mortgage. Rising interest rates are affecting mortgage renewals for homeowners in Quebec and across Canada. However, there are potential solutions that homeowners can consider if they’re facing a significant increase in their mortgage rate such as negotiating with their lender, refinancing their mortgage, or exploring alternative mortgage options. Homeowners should start preparing early for their mortgage renewal and consider paying down other debts.
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