Is it time for your mortgage checkup?
After signing a mortgage document, many homeowners forget about it until five years later, when they receive a call or letter saying it is coming due for renewal. But your mortgage needs regular attention, says Brenda Joynson, a Mortgage Consultant with Mortgage Depot in Saanich.
“If you experienced changes in your physical health, you would go see your doctor. With changes in the mortgage world, including the Stress Test, your mortgage broker or banker can find new ways to improve your financial health,” she says.
Here’s five good questions to ask your mortgage professional:
- Do the Stress Test rules apply to me? This test was designed to ensure borrowers would be able to pay the loan if interest rates rose. But did you know the rules do not apply to mortgage renewals, as long as they are with the borrower’s existing lender? You may even be able to move your existing mortgage to a new lender to take advantage of better rates, without having to apply the stress test.
- Does refinancing make financial sense to access my equity for other things? Even with mortgage payout penalties, your savings could be significant. That could help you increase cash flow by eliminating credit card balances or lines of credit. This would allow you to increase your mortgage payment and pay it off faster to save interest. Perhaps your properties need maintenance, or you’re considering a renovation to enhance its value and/or rentability? Leveraging your equity can also play an important role in successful investing.
- Is there room for improvement in my mortgage structure? If you own more than one property or want to pursue tax-deductible investments, changing your mortgage structure can save you money at tax time. For example, many multi-level mortgage products allow you to separate non-deductible mortgage payments from your deductible mortgage interest.
- When should I lock in my variable-rate mortgage? Current fixed rates are often lower, so if you plan to keep the property, it’s worth having your professional do a comparison between fixed rates and your current variable rate. A key consideration are the penalties charged for breaking the mortgage contract early.
- How can I pay my mortgage off faster? Mortgage payments determine amortization length: the higher the payment, the lower the amortization; the lower the payment, the longer it takes to pay the mortgage off. One strategy worth looking at is extending amortization on revenue properties and reducing it on your residential mortgage.
If you have other mortgage questions, an annual mortgage check up might be just what the doctor ordered, Joynson says. Best of all, it doesn’t cost you anything!