It’s important to have a look at your mortgage when during the mortgage term as you may want to make some changes to it. If we look at a variable rate mortgage as an example, booked in 2016 these were done at a rate of prime minus .30% and less, some were done at prime plus. This blog uses prime -.30%. Here is why it pays to have a mid-mortgage review.
Why a Mid Mortgage Review?
If you were a client in 2016 and booked a mortgage you would get a rate today of 3.40% or even higher. If that mortgage is transferred now, you get a rate that has a discount of P-1% or even more. You could end up with a rate of around 2.75% or less than that.
You would save .65 basis points for the remainder of your mortgage term and also get a deep discount off of the prime rate for the rest of the term. If you have a $450,000 mortgage and had 30 or more months remaining on that mortgage you would save around $7,300-$9,000 which would go into your pocket or the Principle of the mortgage. This would mean reduced amortization and more savings for you. It might seem like it wouldn’t make sense to transfer a mortgage mid-term, but you really have nothing to lose and you have a lot to gain if you decide to get your mortgage evaluated. Here are some reasons why you might want to evaluate your mortgage before the term is up.
Take Time to Assess Your Mortgage
It doesn’t make sense to just get a mortgage and forget about it as you could be throwing money out the window. You should be actively looking for ways to save money on your mortgage, especially if you have a large one. If you don’t reassess from time to time, you could be missing out on a lot of savings. It’s important to look at the mortgage mid-term to see where you stand. Here is why you might want to do that.
Change in Income
If you can lower payments or save in interest, this can add up to a lot in savings which is money you could put elsewhere. For example, your financial situation might have changed. Perhaps you have more capital to put down on your mortgage or maybe you have less. This is time to assess the mortgage to see where you could save or even pay it off in less time. Once the mortgage is renewed, you have no real way to modify the mortgage and you’ll then have to wait for your next renewal date to do anything about it unless you like the idea of discharge penalties. If money is tight, reassessing your mortgage can help if you can lower the interest rate.
The interest rates may have changed and a renewal, might not offer you the best rates. You can get better rates if you change things before the renewal is up especially if the rates are now in your favor. You should be looking for better rates as this can be critical if the housing market is going into a rising rate environment as you’ll pay more at renewal. If another lender has a better interest rate, this is something to consider.
New Financial Goals
Perhaps you have new financial goals that are causing you to reassess your current mortgage. If you have new goals you may want to look at a different mortgage to reflect those goals. Perhaps you need to save more money and can’t put as much on your mortgage as you would like to. The mortgage always takes a big chunk out of your income, but that income is sometimes needed elsewhere due to life changes. You should look at your finances and this includes the mortgage. For example, some change might include a divorce, starting a family, marriage, change in career, and so on.
Don’t just get a mortgage and forget about it. You should actively look for ways that you could improve your mortgage. Of course, your individual financial situation will play a large role in whether you decide to change the mortgage or leave it as it is. Talk to a financial adviser such as a mortgage broker about your current situation and give your mortgage a review before it comes up for renewal as you may end up saving a lot of money. You can get better rates for your mortgage if you take the time to reevaluate and look for what works for you.