Do you feel like we’ve been on an interest rate roller coaster? The low interest rates that we’ve all become accustomed to seem to have disappeared, and we’re now feeling the inflation pinch – from the grocery store to the gas pump. Unfortunately, if you’re amongst the many faced with renewing your mortgage in upcoming months, it’s highly likely that you’ll be navigating the rising interest rates on that too. You’re probably left with one question: “What can I do?”
First and foremost, we recommend that you start talking with a trusted Mainstreet advisor early. Any mortgage renewal is a big decision, now more than ever, that will impact your financial life for at least the next 1 to 5 years. You and your advisor will go over all your renewal options in detail so that you’re prepared to make the best decision possible for your situation. Starting the conversation early ensures that you’re not rushed into anything or having to make a quick decision right at the renewal date.
We like to discuss your short, mid, and long-term financial goals to determine what you can do now, to set yourself up for success in the long run. With that being said, paying off your mortgage as quickly as possible may be on hold, while keeping your mortgage payment manageable is top priority.
Below we have detailed a list of items that you can review and edit to reflect what you want out of an appointment with a Mainstreet advisor when discuss your upcoming mortgage renewal:
Fixed vs. variable rates
When renewing your mortgage, you’ll need to decide whether to go with a fixed or variable interest rate. Fixed rates offer predictability and stability, while variable rates can fluctuate based on market conditions. If you want to do some research before your meeting, you can find our mortgage rates here.
Structure
You’ll need to decide on the structure of your mortgage. Discuss with your advisor about splitting your mortgage into chunks, with the current rate environment, renewing the full balance for a 5-year term, may not be the best solution for you. For example, what does splitting the balance into a 1- and 3-year term look like for your budget. No one has a crystal ball regarding what interest rates will do next, keeping options on the table will allow you to make changes along the way.
Payment Frequency
You may want to consider changing your payment frequency to either increase or decrease your payments. For example, switching from monthly to accelerated bi-weekly payments can help you pay off your mortgage faster and save on interest costs. Aligning payment dates with your pay date will help with budgeting.
Prepayment options
You may have the option to make prepayments on your mortgage, allowing you to pay down the principal faster in order to save on interest costs.
Your financial situation
It’s essential to consider your current financial situation and any changes that may have occurred since you first took out your mortgage. This includes any changes to your income, expenses, or credit score.
Review your budget
Consider things like cancelling monthly subscriptions that you no longer use or penciling out how much that daily latte actually costs per month to get a better view on your weekly/monthly expenditures. Remember, this isn’t to take the joy out of the life’s simple pleasures, but to put you at ease when it comes time to making the bigger financial decisions. If that latte makes your day, we’ll move onto the next item on the list! Our advisors are always here to help with creating a budget that works best for you.
Some of the ways that Mainstreet may be able to help:
Refinance your mortgage
This involves completing an application and providing income confirmation. When approved you may be able to consolidate your debts into your mortgage to lower your overall monthly payments freeing up cash flow.
Payment deferral
When approved this allows you to temporarily suspend or reduce your mortgage payment for a specified period of time. This can be useful if you are experiencing financial difficulties, such as a job loss or a medical emergency. Keep in mind that the payment deferral means that once you resume payments, your mortgage payment will increase for the remainder of the term.
Modifying payment terms
By changing the terms of your mortgage, it could lower your monthly mortgage payment obligation. Doing this may help relieve financial pressure. Please note that lowering payments or extending your amortization will increase your over all interest costs. When you get back on your feet, make sure to increase your payments.
Blend and extend
This is a type of renewal where you blend your existing interest rate with the interest rate currently offered at Mainstreet. This results in a new interest rate somewhere in between. In addition, your term will be extended by the length of the new term. This can be done to adjust your mortgage terms to better suit your financial situation.
If your mortgage payments seem overwhelming and you find yourself struggling to make ends meet, there are several options that you can consider, and we’re here to help you find them and put them in place. We know how hard it can be to have these, sometimes uncomfortable, conversations, but we want to assure you Mainstreet is here to help without judgement. We live in the same communities, shop at the same stores, are subject to the same inflation, and feel that same pinch. The only difference is that because of our job, we know some tools to make life a little easier, and we want to share them with you.