Fixed mortgage rates have been steadily increasing these days, making this a big deal in the mortgage world.
Fixed rates have increased by about one percentage point, or 100 basis points, since the start of this year.
The average monthly mortgage payment increases $12-$13 per $100,000 of debt for every 0.25% increase in mortgage rates.

In the short term

These increases mostly impact first-time homebuyers who don’t have a house yet. In the near future, fixed-rate mortgage holders will be reaching the end of their term and could have to renew their mortgages at higher rates.

According to Mortgage Professionals Canada research, nearly 4 out of 10 mortgage holders plan on renewing in the next two years, and 57% plan to renew within the next three.

There is a possibility

that the renewal rates on the 5-year fixed rate mortgages of many borrowers could be at least one percentage point higher than the rate they locked in five years ago.

Refinancing could be an option

If you’re concerned about higher payments. Basically, you are refinancing your loan when you refinance as you will get a new rate, new terms, and a new amortization period. A loan may also allow you to withdraw more funds for investments, renovations, etc.

Refinancing may reduce your monthly payments as well.

If you refinance ahead of your renewal, you can lock in today’s fixed rates before they increase in the future. You can also opt for a variable-rate mortgage instead. The rates on most variable mortgages are lower than comparable fixed mortgage rates at the moment. It would take several quarter-point rate increases before variable rates would cost more than fixed rates, even if the Bank of Canada increases rates throughout this year and into the next.

If you extend your amortization, your monthly payments can be lower. People who want to maintain their monthly free cash flow may benefit from this solution. Taking equity out of your home may also be possible if you need it.

Although increasing your prepayments in future years can counteract this, it would extend the amount of time before you are mortgage-free.

I invite you to sign up to our FREE consultation session regards to a mortgage refinance and navigate some of the potential roadblocks, such as penalties or qualification requirements.

We can discuss your unique situation and the options available to you. Give me a call today! 403-253-2022 or email me!