Renewing in 2025? 

A high percentage of the Canadian population are approaching mortgage renewal in 2025. Those who are renewing could be facing increased interest rates of 1%-2.5% higher then their current rates. Especially if you are locked in for a five year fixed back in 2020. 

Renewing a mortgage may seem like a daunting task, as there have been many changes to the Canadian mortgage market. This year will be a massive year for renewals with over $300 Billion in mortgages are set to come for a renewal. As 1.2 million Canadians are bracing for impact as the likelihood of your mortgage interest increasing is almost certain ! 

What to Expect in 2025:

In 2025 we are expected to see mortgage renewals to be set with higher rates! In 2020, If you either purchased a home or saw an opportunity to take advantage of the historic low rates to refinance or remortgaging at a 5 year fixed mortgage rate sitting at a high 1% to a low 2 % . This year as these 5 year terms are coming up for renewals and rates are looking to be much higher. If you are looking to lock in a 5 year fixed term, your interest rate doubled at the mid to high 4% interest rate. This change could cost the average homeowner hundreds of dollars a month on their mortgage. 

Let’s Break it down: 

If we take for example in 2020 for a $400,000 mortgage locking in a 5 year fixed rate of 2.2% and amortizing the payment period 25 years. Their monthly mortgage payment would be $1,732.66. If you were to take that same example for today’s market at 4.5%. Their monthly mortgage payment would be $2,213.89 A difference of $481.23. Per month, $5,774.76 a year! As thousands of homeowners brace for impact, there are options and opportunities here if you have an open mind, and are able to pivot to use your mortgage to your advantage! 

Canadian rates have been on the steady decline in the later half of 2024. To put things into perspective, at this time last year a five year fixed term was sitting mid 6% now mid 4%. As we expect this trend to continue, it will not be at the pace of the previous 6-8 months. Many experts say we could drop another 25 to 50 basis points this year 2025. This is great news moving forward. Now unfortunately we will not see the glorious rates of 2020. We must focus on the bright side. The imminent is coming so we must prepare ourselves to take advantage of the situation. Here is how we can make the best your new mortgage in 2025. 

How to Prepare For the Impact of Renewing 2025? 

1. Start Early: If you are an individual approaching your mortgage renewal, it is best to start this process early. How early? 120,180 days before the end of your term depending on the lender. 
2. Acquire a Rate Hold: This is what you are guaranteed from a lender with a specific rate will be available for a set period of time ( Generally 120 days ). This time will give you time to plan and budget for the new mortgage rate.  
3. Talk To a Mortgage Broker/ Agent: They will have access to multiple lenders, finding you a mortgage strategy that would best for you. Often they will have volume discounts from major lenders. Since they only get paid by the lender when the contracts gets signed, their services are free for you. 
4. Shop Around: Your current lender might not be your best option. Beginning this process early will allow you time to find a lender with a lower rate, better plan or allow more flexibility. Talk to a mortgage broker to allow them to do this work for you. 
5. Consider a Short Term Fixed Rate:  with rates expected to drop even further in the next few years. Aiming to catch them on the downward trend could be a quick fix to gain more cash flow
6. Extend Your Amortization Period: If you feel that the higher payments of renewing in 2025 are undaunting. Take a look at extending your amortization to lower your monthly payments. This on the flip side increases you interest you’ll pay over the duration of your mortgage. It is an easy temporary solution to keep you expenses in check. 
7. Refinancing: This option could allow breathing room, accessing equity from your home to give you cash in hand to cover higher mortgage payments could be a short term solution. If you Refinance on the renewal date, you also face no penalties. If you are thinking of updating your home, have a child ready for post secondary or another big expense you are planning on. This option will allow you to access capital for higher payments. 
8. Variable Rate: As there is much expectation that rates are going to slowly lower over the next few years. If you are able to cover the higher payments with expectation of them lowering. A short term variable rate might be a great option for you. 

Take Away: 

The biggest take away from this is to understand that you have options. There are many ways to take advantage of what you have access to. Each home, client, and family have different goals, strategies and risk tolerance. Advising a mortgage broker to help you navigate through this time could save you thousands. The earlier we chat, the easier this princess will be to better prepare yourself for the future of your home.  

Seasons Greetings Everyone, 

My name is Taylor Bazinet, from TAB|Mortgages of Mortgage Man DLC. 

Welcome to our Newsletter! Here we will be sending you insights, information, strategies and everything we find important to the world of mortgages. Guiding you to the best mortgage, where you feel confident and happy. We know how important your home is. Our goal is to keep you as comfortable as we can, so let’s ‘Bring You Home’. 

A very exciting time as the holidays are around the corner, but what can make it more exciting… A RATE DROP!! I am so excited to begin my newsletter by sharing this exciting news. Rate drop of 50 basis point. Whenever a rate drop happens that is very exciting but, what does that mean for you? What are Basis points? Will your mortgage payment go down? A Basis Point is a unit of measurement. 1 Basis Point or (BPS) is 1/100 of a percent or 0.01%. They are used to clearly communicate the changes in interest rate. For example if the lending rate were to change from 5% to 6% does that mean 1% or 20% increase. To say an increase of 100 basis points makes this much more clear. Does this mean your mortgage payments will lower, because the bank of Canada lowered its rate by 50 BPS? 

Well it might, that is if you are in an adjustable rate mortgage. If you were on a fixed or variable rate mortgage and are not up for renewal yet then no, your payments will remain the same until your terms ends and come up for renewal refinance or switch your mortgage. Let’s dive a little deeper shall we. 

If you were on a variable (VRM) or adjustable (ARM) mortgage your mortgages will change. payments will fluctuate with the market, it is a high risk high reward method. Right now you would be rewarded from the news earlier this week, as your monthly payments should reflect that of the market trends. 

In an adjustable mortgage (ARM) your payments might change. For example, if your mortgage is $2,000 ($1,000 to interest and $1,000 to principal) as Prime dropped you could pay $950 to interest and $1,000 to principal. So your mortgage payment would be $1,950

In a Variable mortgage (VRM) your payments will remain the same but the amount to principal and interest will change. For example if you pay $2,000 a month for your mortgage and we used the same numbers. $1,000 for interest and $1,000 for principal. If Prime lowers, your payments would look like $950 to interest and $1,050 to principal. Still equaling $2,000 monthly mortgage payments. 

If you are in a Fixed rate mortgage. Well this might not excite you unless you are approaching the end of term. Your $2,000 dollar mortgage will remain the same until we refinance, switch or renew at the end of your term. 

If you are looking to enter the market, or to further expand your real estate portfolio. Reach out or stay tuned. We will further discuss what this means for you. Reach out if you have any questions if you fall into this group let’s ‘‘Bring You Home’ !

Fixed vs Variable 

Buying a home is a huge milestone. One of the biggest questions borrowers ask in this process is whether or not to have a fixed or variable rate mortgage? This will directly impact how much you pay both in principal and interest with each installment of the term. This decision could cost you thousands. Luckily we can help you make the best decision for you. 

Fixed Rate Mortgage 

With fixed rate mortgages your interest rate remains the same throughout the term of your mortgage (term is not your amortization period). Usually a term is  2,3 or 5 years.  

Benefits of fixed rate:

• Interest stays the same so you’ll have a great idea of what your installments for payment and can budget accordingly.. 
• Easier to understand 
• You will have confidence knowing what to budget for. 

Concerns of a fixed rate :

• Interests rate are often greater than that of a variable rate mortgage 
• Locked in at this rate for the term 
• If you break your mortgage, you will likely be facing penalties.

Variable Rate Mortgage: 

With variable rate mortgages your payments will stay the same throughout the term, but your interest may fluctuate. 

Benefits of a variable rate:

• Initial rates are often lower than that of a fixed rate mortgage. 
• An initial lower payment may help you qualify for a larger loan
• you can convert to a fixed rate at any time. 

Concerns of a variable rate:

• If the prime rate increases your interest rate goes up accordingly.  
• If this happens, your principal payments lower as your interest increases with each payment. 
• Much more difficult to budget. 

What Option is better?

This depends on your goals, financial situation, and of course, the market. Let’s start with the market. In today’s market most people aim for a fixed rate given recent rates have steadily climbed.! A fixed rate also gives you security knowing that you will not be hit harder by potential rate increases. This will allow you to budget for everyday expenses. 

Now if you have capital, the property you are purchasing is well within your budget and want to take a chance on the rates dropping over the next 2-4 quarters or at the very least maintaining current primes, then the variable rate could be for you. Again it comes down to what you are comfortable with. Purchasing a property is already stressful enough. You need to do what is right for you. 

Can you switch from a variable-rate to a fixed-rate mortgage?

You can change your mortgage rate type at the end of your term when you renew your mortgage. Some lenders also allow you to convert your variable rate to a fixed rate during your initial term without penalties, but at times going from Variable to fixed borrowers can be hit with penalties

Mortgage Renewal Benefits.
Is your mortgage coming up for renewal? Do you know about all the incredible options renewing your mortgage can afford you? If not, we have all the details here on how to make your mortgage renewal work for you as we start to think about 2024.

Get a Better Rate

Are you aware that when you receive notice that your mortgage is coming up for renewal, this is the best time to shop around for a more favourable interest rate? At renewal time, it is easy to shop around or switch lenders for a preferable interest rate as it doesn’t break your mortgage. With interest rates expected to come down as we move into the New Year, taking some time to reach out to me and shopping the market could help save you money!

Consolidate Debt

Renewal time is also a great time to take a look at your existing debt and determine whether or not you want to consolidate it onto your mortgage. For some, this means consolidating your holiday credit card debt into your mortgage, for others it could be car loans, education, etc. Regardless of the type of debt, consolidating into your mortgage allows for one easy payment instead of juggling multiple loans. Plus, in most cases, the interest rate on your mortgage is less than you would be charged with credit card companies.

Start on that Reno

Do you have projects around the house you’ve been dying to get started on? Renewal time is a great opportunity for you to look at utilizing some of your home equity to help with home renovations so you can finally have that dream kitchen, updated bathroom, OR you can even utilize it to purchase a vacation property!

Change Your Mortgage Product

Are you not happy with your existing mortgage product? Perhaps you’re finding that your variable-rate or adjustable-rate mortgages are fluctuating too much and you want to lock in! Alternatively, maybe you want to switch to variable as interest rates start to level out. You can also utilize your renewal time to take advantage of a different payment or amortization schedule to help pay off your mortgage faster!

Change Your Lender

Not happy with your current lender? Perhaps a different bank has a lower rate or a mortgage product with terms that better suit your needs. A mortgage renewal is a great time to switch to a different bank or credit union to ensure that you are getting the value you want out of your mortgage if you are finding that your needs are not currently being met.

Regardless of how you feel about your current mortgage and what changes you may want to make, if your mortgage is coming up for renewal or is ready for renewal, please don’t hesitate to reach out to a DLC Mortgage Expert today! We’d be happy to discuss your situation and review any changes that would be beneficial for you to reach your goals; from shopping for new rates or utilizing that equity! Plus, we can help you find the best option for where you are at in your life now and help you to ensure future financial success.

Source: https://dominionlending.ca/mortgage-tips/mortgage-renewal-benefits