Are you a homeowner? Depending on when you purchased your home and secured your mortgage, you might be in a situation where several years have passed since you took a look at your mortgage needs. Your priorities may have changed, and as a result, your mortgage needs may have altered as well. Plus, market conditions have certainly shifted, especially within the last couple of years. With all this in mind, it’s time to figure out if your mortgage still suits you. Here are some signs and situations to consider.
You’ve decided to stay long-term
When you bought your home and secured your mortgage, you may have been unsure how long you were going to stay in the house. Things change over time, so it’s normal if you weren’t certain your home was going to be a long-term living situation when you moved in. If you have decided you would like to stay in your home for a long time, this may affect your mortgage.
Maybe you will decide to complete home renovations as you build more equity, or you might think you can secure a better interest rate. You should only consider these solutions if you want to invest in and live in your home long-term. You might want to think about refinancing to increase your cash flow to complete home renovations, or perhaps to access a better interest rate. Neither of these options are great for short-term homeowners, as the costs involved will outweigh the benefits.
Your financial situation has changed
Our finances change as we go through life. Employment and income can rise and fall, as can debt levels. Do your finances look different today than they did when you secured your mortgage? It’s possible your current terms no longer meet your needs. After all, you likely aimed to find a mortgage that suited your situation at the time. It makes sense that financial changes have thrown this balance off. Perhaps you’ve gotten a new job with a higher income, or maybe you are now working for less money, or you may not be working at all right now. Maybe you became self-employed, which can make a big difference to your income and employment status. Perhaps you have gathered new debts that are straining your finances a bit. No matter how your financial situation has changed, it’s important to address them and how they affect your mortgage needs.
Interest rates have changed
Interest rates have been bouncing around for a while now. It’s not surprising if your current rate doesn’t match the rates of today. Let’s say you secured your mortgage four years ago. Since then, we have been through a pandemic and record-low rates, followed by intense inflation and aggressive rate hikes. If you have a variable rate, your payments will have changed alongside these trends, but those with a fixed rate will still be paying the same amounts as four years ago. If your rate is higher than today’s offerings, a refinance might be a good option. Variable rates are still lower than fixed rates, but fixed rates are likely to start falling once we get past these intense rate hikes.
You want to pay off your mortgage faster
Depending on your current terms, you may already have prepayment or lump sum payment privileges that allow you to make payments early, or make larger payments at a time. These privileges mean you can pay off your mortgage faster, shaving time off your loan period and reducing the interest you will owe over time. If you don’t have these options, and you’re in a financial position where you could be making payments earlier, you may need to reconsider your mortgage terms. These privileges have limitations but they can be great for borrowers, helping them save money and own their home free and clear faster. If this sounds appealing to you, it’s worth having a conversation with a broker about potentially adjusting your terms.
As a quick note, you may also be feeling like you want to extend your amortization period. In this climate, inflation is high and consumer goods are expensive. Many Canadians may be experiencing some debt and are looking for ways to reduce their financial burden. If this sounds like you, you may be able to refinance your mortgage to extend your amortization period. This means each month, you will owe a little less in mortgage payments, freeing up your cash flow a bit. You will be making payments for longer, but with less stress on each payment.
It’s natural for your mortgage needs to evolve and change as time goes on. The important thing is to be aware of these changes. You should contact a mortgage professional if you feel your mortgage doesn’t work for you anymore. If that’s the case, we can help find a solution for you to meet your current needs, with our access to a variety of lenders and products.
If you’d like to chat about your mortgage needs, get in touch with me!