Facing a mortgage renewal at higher rates? You’re not alone. While fixed mortgage rates have come down by as much as 0.50% off their highs, anyone with a fixed rate coming up for renewal won’t just have to accept a higher rate… but the higher payment that comes with it.  

Given that the payment increase can be substantial, it goes without saying that this is quite discomforting to many.   

However, it may be possible that you could carry on with a similar payment to what you’re used to paying… while having some free money thrown at you at the same time. And who doesn’t like free money?  

The first thing you’ll need to decide is what’s most important to you: 

Getting the lowest mortgage rate  

Or having the lowest mortgage payment  

Getting the lowest mortgage rate doesn’t necessarily mean that you’ll have the lowest payment, as I’ll soon explain. This is why you’ll generally need to decide as to which one is most important to you. However, there are some situations where it might be possible to have the best of both worlds.  

 

The Lowest Mortgage Rate  

Choosing the lowest mortgage rate will result in paying the least amount of interest over the term. However, as a mortgage transfer or renewal will be a continuation of your remaining amortization, the payment will be higher as the payments are spread over a shorter period. For example, if you started out with 25 years, and 5 years have passed, then your maximum amortization for the renewal or transfer will be 20 years.  

Let’s say you purchased your home 5 years ago for $950,000 with 20% down payment. You had a 5 year fixed at 3.49% amortized over 25 years. Your current monthly payment would be $3,790.44. If you have not made any additional payments to the mortgage, then your balance at renewal would be $655,608.01 

The lowest 3 year fixed rate available for a mortgage renewal is 5.49%1, which is the lowest as of today. As you have 20 years remaining on your amortization, your new payment will be $4,483.31 

That’s an increase of $692.87. Equivalent to the cost of leasing a decent car!    

 

The Lowest Mortgage Payment 

The best way to lower your payment would be to refinance your mortgage, which allows you to increase your amortization to 30 years. The lowest 3 year fixed rate for a refinance can be as low as 5.69%2. This would drop your payment from $4,483.31 to $3,779.843.     

That’s a whopping difference of $703.47 per month! Right in line with what you were paying on your current mortgage term… $10.60 per month lower actually. Kind of like having a couple of free coffees each month… or maybe only one if you like Starbucks! Looks like you can pick up that new car after all!                 

 

Free Money After Closing! 

It’s also possible to receive a cash back anywhere from $500 to $4,000! The amount of the cash back will vary based on the size of your mortgage. This can potentially cover you for the refinance fees, while still giving you some extra cash to help you with those January credit card bills. Unlike other types of cash back programs, this does not need to be paid back if you break the mortgage. It would be paid to you in a single lump sum payment within 30 days following your closing date.  

This cash back offer applies to purchases as well.  

 

Worried About Extending Your Amortization?  

Having a 30 year amortization does not mean that it will take you 30 years to pay off your mortgage. It simply means that the payments are spread out over a longer period of time, resulting in lower monthly payments. You can always utilize your prepayment privileges, which would then lower your effective amortization, making the 30 year amortization irrelevant from that standpoint.  

                                          

Do You Need to Borrow Additional Funds? 

When refinancing, you can even take additional equity out of your home up to 80% of your home’s value (based on qualified credit and income). If you’re planning on renovations, sending your kids to college, or any debt that you would like to consolidate, this is the time to do it. If you’re refinancing, you can increase the size of your mortgage at no additional cost. 

 

Have You Been Considering a HELOC? 

You can also add a Home Equity Line of Credit, which would give you access to your equity when you need it in the future. The HELOC limit will auto increase as you pay down your mortgage, however, not quite as fast as it did in the past. You can read about the new HELOC regulations that came into effect on November 1st, 2023 in my recent blog on Changes to Readvanceable Mortgages.                 

 

The Lowest Mortgage Rates on the Market  

The lowest mortgage rates can vary, and can fluctuate from week to week. Sometimes even day to day. One thing that we are very serious about is getting you the absolute lowest rate on the market. We’re are committed to saving you as much money as we can, while giving you a better experience with your mortgage than you’ll get anywhere else… and that is also something that we take very seriously. Our close to 700 Google reviews from our previous clients speak for themselves!  

 

Conclusion  

It’s great to have the lowest mortgage rate, however, this can also mean a much higher payment when your mortgage is coming up for renewal. The rate premium on a mortgage refinance can, at times, be a fair bit higher when compared with a straight renewal. However, there are some situations where they may be no rate premium at all.  Not to mention, you may be eligible for a pretty nice cash back at the same time!  

 

If you have a mortgage that is coming up for renewal within the next 120 days, reach out to us and we’ll provide you with the lowest rate options based on your situation.  

 

 

1. The lowest rates available can vary depending on purchase price, down payment percentage, closing date, mortgage amount, type of transaction, etc. You can read more about this in my blog on Why Different People are Quoted Different Rates  

2. The lowest refinancing rate can change day to day, and the lender with the lowest rate can fluctuate day to day. As this is a preferential rate we receive from the bank, we first have to submit your application to them. As of writing, the lowest 3 year fixed received are in the 5.79% to 5.89% range, however, the exact rate cannot be guaranteed until we receive the file back from the lender’s pricing department. There is a chance the rate can come in above or below the range quoted. We will give you an idea of what you can expect based on your situation once we know the mortgage amount required along with the expected closing date. We’re committed to getting you the absolute lowest rate possible.  

3. When refinancing, there is a legal fee of roughly $800, plus the discharge fee from your current lender, which is roughly $350 in Ontario.  In the example above, this would bring your new mortgage amount to $656,758.01, which is the number the refinance payment is calculated on. The discharge fee still applies when transferring your mortgage to another lender.  

4. The cash back is available for refinances closing up to February 29, 2024. They are also available on some purchases. Cash back mortgages can be arranged on other mortgage options as well.  Contact us for complete details.